In the event of insolvency, haulage operators may be required to surrender their operators license to the relevant regulatory authority. This can have a major impact on the business, as it may no longer be able to legally operate and generate income.
Additionally, the process of applying for and obtaining a new license can be time-consuming and costly, which can further hinder the recovery of the business. In some cases, operators may also face additional penalties or fines for operating without a valid license.
Operator licensing refers to the process by which a government agency grants a license to an individual or company to operate a business or service, such as a transportation company or haulage business. In order to obtain a license, the operator must typically meet certain qualifications and adhere to certain regulations.
Insolvency, on the other hand, refers to the financial state of a company or individual that is unable to pay their debts as they come due. If a licensed operator becomes insolvent, they may be at risk of losing their license, as they may no longer be able to meet the requirements or comply with regulations.
However, the specific rules and regulations regarding operator licensing and insolvency vary depending on the industry and the jurisdiction
Effect of insolvency on haulage operators licence
Application for the operator’s licence will be submitted under the limited company’s name. Therefore, you won’t be able to rely on the licence if the firm goes into administration or liquidation. An administration may submit a request to operate the company for a limited time under the current operators licence. Within one month, a liquidator must give up their licence. However, the current licence may be kept if a business voluntary agreement is proposed.
Although a CVA requires approval from 75% of creditors, this does not restrict the employment of liquidation or administration proceedings for haulage businesses. Licenses for operators are not transferrable.
However, you will need to have a licence in place if you want to purchase a haulage company that is insolvent. You may be able to submit an application for an interim operators licence under specific situations.
This can be granted within 21 days, which is a shorter time frame. Be aware that receiving an interim operators licence does not ensure you’ll get a complete operators licence.
Financial standing requires the licence holder
The licence holder must be in good financial condition and be able to show that they have constant access to the necessary amount of capital and reserves. For the first car, this is currently fixed at £6,650, and for each additional vehicle, it is set at £3,700. The basis for these figures is determined by EC Regulations (€9,000 & €5,000) and linked to the official EC exchange rate as of the first working day of each year’s October, with modifications taking effect on the 1st January that follows. Given the terrible exchange rate, these numbers are probably going to rise sharply as of January 1, 2017.
To put it simply, case law has developed to the point where this condition can be met by showing that you have access to cash in the bank or an unused overdraft facility. There are other solutions, but it is outside the scope of this article to examine them.Traffic officials are well aware that financial problems do not appear overnight, therefore they rely on licence holders to alert them as soon as they do.
The relevant Traffic Commissioner should be notified right away if insolvency advice is obtained and that advice is to initiate a formal insolvency procedure, especially if the licence holder, partners, or directors wish to continue operating commercial vehicles. They have the discretion to grant a six-month grace period during which a licence holder can re-establish continuous access to the necessary funds.
Traffic Commissioners recognise the rescue culture
The Traffic Commissioners are aware of the rescue culture that exists in the UK, but they are also concerned about the harm that unethical or dishonest commerce can do to one’s reputation. Any request for a new licence following an insolvency, including but not limited to a prepack administration, will be carefully reviewed to make sure that all behaviour has been suitable and that any new funding has been obtained legally and is not being used unfairly against creditors. Such petitions are frequently taken into account during a public investigation, and in such cases, there may be a delay of up to 6 months before receiving a grant.
An operator’s licence can only be transferred by the legal body to which it was originally issued. Traffic Commissioners see continuous use once an insolvency action is in place very negatively, even though the licence is theoretically still valid until it is either cancelled or surrendered. It is possible for an insolvency practitioner or another party who wants to carry on with the business to request a limited extension of the current licence during an insolvency, but these extensions are difficult to obtain and few insolvency practitioners are willing to take on the responsibilities of operating commercial vehicles.
Any insolvency practitioner who provides advise to holders of operator’s licences should make sure that individuals they are advising quickly get the proper legal advice regarding the effects on the operator’s licence and any potential future applications. In order to facilitate a smooth transition from an insolvent business to a buyer of that business, experience suggests that early and prompt notification to the relevant Traffic Commissioner will significantly aid in obtaining a new licence, possibly without a public inquiry, and/or the early issuance of an interim licence.
When can an interim operators licence application be made?
Only after submitting an application for a full operators licence can an interim operators licence application be made. Only when there are compelling reasons to award an interim operators licence may an application be made. The preservation of jobs may be an appropriate urgent purpose in an insolvency situation.
Based on prior cases, the transport commissioner will only issue an interim licence when the company and the insolvency practitioner get started right away. This is done to ensure that the new business, which is purchasing the company out of bankruptcy, satisfies the financial conditions for the final operators licence.
The interim operators licence application will be denied by the transport commissioner if they are not consulted early in the process. Due to the circumstances, it has been known to take up to 6 months to conduct extra scrutiny.
Make sure you are working with an insolvency practitioner who has experience in the sector if you have a haulage or freight business that is having financial problems or are wanting to purchase a haulage firm out of bankruptcy.
Need help turnaround help
If your business is a holder of an operators license and worried about the implications that insolvency will have on it, simply complete the online enquiry form and one of our specialist insolvency operator Licensing team will make contact.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.