As a country we find ourselves in completely uncharted waters. Never has the leisure industry experienced disruption such as that currently caused by COVID-19 and the steps taken by the government to stop the spread of infection.
With huge challenges to cash flow and businesses fighting to stay alive we think it is vitally important for clients to understand what happens to a Premises Licence should the worst happen and insolvency becomes a real possibility. We hope insolvency doesn’t become a reality, but if it does there are things you can do to protect your Premises Licences.
The starting point, from a licensing perspective in terms of insolvency, is section 27 of the Licensing Act 2003, which provides that a Premises Licence lapses if the holder of the licence:
- dies;
- becomes a person who lacks capacity within the meaning of the Mental Capacity Act 2005;
- becomes insolvent;
- is dissolved;
- if the premises is a club, ceases to be a recognised club; or
- ceases to be entitled to work in the UK.
Section 27 goes on to say that a person becomes insolvent on:
- the approval of a voluntary arrangement; or
- being made bankrupt; or
- having his estate sequestered; or
- entering into a trust deed with his creditors.
Section 27 also sets out the position in respect of companies. Companies become insolvent on:
- the approval of a voluntary arrangement; or
- the appointment of an administrator; or
- the appointment of an administrative receiver; or
- going into liquidation.
The effect of a Premises Licence lapsing is that there is no Premises Licence to speak of and so any Licensable Activities (sale of alcohol, late night refreshment, and regulated entertainment) cannot be provided on or from the Premises that the Premises Licence pertains to.
If one of the triggers for the lapse of a Premises Licence has occurred or is likely to occur it is important to take action as quickly as possible. This is because of the provisions of Section 50 of the Licensing Act 2003, which can, if not properly actioned, lead to the loss of a Premises Licence for good.
Section 50 applies where a Premises Licence has lapsed because one of the events in section 27 has taken place, or where a Premises Licence has been surrendered in accordance with section 28 of the Licensing Act 2003
The basic position is that you have 28 days from the day the Premises Licence lapses to transfer the Premises Licence and “reinstate” it.
Section 50 provides that anyone who could apply for a Premises Licence under section 16 of the Licensing Act 2003 can apply to transfer of the “lapsed” Premises Licence provided:
- the application is made no later than 28 days after the day the Premises Licence lapsed; and
- the request to transfer the Premises Licence is requested with immediate effect.
Those who could apply for a Premises Licence, and who can therefore apply for a transfer include:
- an individual or individuals jointly
- a company
- a partnership
- an unincorporated association
- a recognised club
- a charity
- the proprietor of an educational establishment
- a health service body
- a person registered under Part 2 of the Care Standards Act 2000
- a person registered under Chapter 2 Part 1 of the Health & Social Care Act 2008 in respect of an independent hospital in England
- the chief officer of a police force in England
who is carrying on, or proposing to carry on, a business which involves the use of the Premises for Licensable Activities, or who is making an application pursuant to a statutory function.
Provided a transfer application is made in accordance with the provisions of section 42 of the Licensing Act 2003 (the correct form used/fee paid etc.), section 50 goes on to say that the “lapsed” Premises licence is reinstated from the time the application is received by the relevant Licensing Authority.
This means that from the time the application is with the council, Licensable Activities can be provided on or from the premises to which the Premises Licence pertains.
It is important to note that if the application to transfer the Premises is rejected or is withdrawn then the Premises Licence will lapse once more.
Finally, it is hugely important to understand that you only get one go at transferring the Premises Licence to reinstate it. A sting in the tail of Section 50 means that only one transfer application can be made to reinstate the licence and if the application fails or is withdrawn, the Premises Licence is gone for good.
Our experience is that financial turmoil can understandably lead to Premises Licences being overlooked. Our view is that it is important to consider the prospective impact of insolvency on Premises Licences because they are a valuable asset. This particularly applies to Premises Licences with generous hours or few conditions, or those within highly sought after Cumulative Impact Areas.
Our top tips for ensuring that your Premises Licences don’t fall victim to lapse and loss are:
- Look at who holds your Premises Licences. Is it an individual, company or some other entity?
- Assess the likelihood of that entity becoming insolvent. Use a scale of 1 to 10 (1 being extremely likely and 10 being not likely at all) if that helps.
- If it is likely, or there is a chance that the entity will become insolvent, start taking steps to protect your Premises Licences immediately. Don’t wait for insolvency, get ahead of the curve.
- Identify a “safe pair of hands” – a person, company or other entity that can become Premises Licence Holder. You really have next to unlimited possibilities in that regard
- Draft (or ask us to draft) Consent to Transfer Forms giving permission to transfer the Premises Licences from A to B in readiness for potential applications – there is no harm in being prepared
- If the worst has happened and one of the trigger events in section 27 has occurred. Don’t panic. You have 28 days to transfer the Premises Licence to reinstate it
- When making a transfer after an insolvency it is not necessary to submit a Consent to Transfer Form however, be aware that Licensing Authority’s may ask to see some evidence of the insolvency in order to process the transfer
At Woods Whur we are here for you through the good times and the bad. If you are concerned about this or any other issues arising out of the current COVID-19 crisis, please do give us a call and we will do what we can to help and advise you.