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Playing by the rules
August 2009
Playing by the rules
The global credit crunch and deepening recession in the UK together with rising fuel prices are already creating difficult conditions for many road haulage companies. The number of small hauliers going into administration is steadily increasing.
It is all too easy during such difficult times for a company to overlook its obligations under an Operator’s Licence; however, it is imperative that the Traffic Commissioner be advised of any material change in circumstances (i.e. financial status). This is particularly prudent in the event of administration where an operator will have been aware of any precarious financial position for a sufficient period of time in which to notify.
Regulation 31 of the Goods Vehicles (Licensing of Operators) Regulations 1995 deals with the continuance of licences in the event of the death, incapacity or insolvency of the licence holder. It provides that where the holder of an Operator’s Licence goes into liquidation or enters administration, the Traffic Commissioner may direct that the person carrying on the business is to be treated as the licence holder, for a period of up to twelve months.
Once an administrator or liquidator has been appointed, if a decision is made not to continue with the road haulage business of a company, immediate steps must be taken to surrender the licence and return the discs for authorised vehicles on the Operator’s Licence.
However, if the road haulage business is to continue (usually as a result of a sale as a going concern) an application under Regulation 31 must be made at the earliest opportunity in order for this to continue. It is important to note at this stage that Section 48 of the Goods Vehicles (Licensing of Operators) Act 1995 (“the Act”) provides that an Operator’s Licence is not transferable.
A typical scenario in such circumstances is where the directors of the company in administration or liquidation set up a new company with the intention of purchasing the business of the old company. As Operator’s Licences are not transferable, the new company must apply for a licence in its own right, but may under Regulation 31 make an application to the Office of the Traffic Commissioner to continue the licence of the old company (with the administrator’s or liquidator’s consent) while this is determined. Once the new licence is granted the old licence will normally be revoked.
If the above steps are not taken, it is highly likely that both the old and new companies will be called to Public Inquiry on the grounds of loss of good repute, loss of financial standing and possibly unlawful operation in breach of Section 2 of the Act, which could result in regulatory action being taken that could have potentially disastrous consequences for any future business operations.
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