Effect of insolvency of a company that holds a premises licence

Felicity Tulloch, Partner

What happens to your premises licence when the company which holds it no longer exists?

The headwinds facing the hospitality sector continue to bite and we are starting to see licences lapse more frequently. Whilst some premises licences are held in the name of individuals or partnerships, most are held by companies.  The Licensing Act 2003 states that if a company that holds a licence is placed into administration or is dissolved or otherwise ceases to exist, then the licence immediately lapses.

However, steps can be taken to reinstate it if the lapse is caught early.

What can you do to reinstate a lapsed premises licence?

All is not lost once a premises licence has lapsed, but you need to act quickly.

1. If the company has become insolvent, then there are two potential routes to reinstating the premises licence.

One route is by way of an interim authority notice (IAN) which can be applied for by someone with a prescribed interest in the premises (such as a tenant, freeholder of the building, a superior landlord), or by someone connected to the previous premises licence holder (including the insolvency practitioner). The application for an IAN must be made within 28 days of the premises licence lapsing, starting on the day after the lapse. The IAN permits the holder to act as a licence holder and provides three months within which a relevant transfer application can be made, otherwise the licence will lapse permanently.

The second route to reinstatement – and the most common – is by way of a transfer application. The transfer application must be made within 28 days of the lapse, starting on the day after the lapse. It will have immediate effect. Any new premises licence holder must be “a person who carries on, or proposes to carry on, a business which involves the use of the premises for the licensable activities to which the application relates.”  This can include the landlord of a premises where the premises licence is held by the operator tenant.

2. If a company has been dissolved, then – similar to insolvency – the premises licence can be reinstated with immediate effect so long as the requisite transfer application is made within 28 days of the lapse, starting on the day after the lapse.

If the worst has happened and the licence has irrevocably lapsed because no steps to preserve it were taken within 28 days, then immediate steps must be taken to ensure all licensable activities are lawfully conducted.  Do not be tempted to operate without the correct authorisations in place, or to transfer the lapsed licence hoping the licensing authority will not notice (they will). Both are an offence under s136 and s158 (making a false statement) of the Licensing Act 2003, respectively. An application for a new premises licence will be required. Of course, there is no guarantee that the licence granted will reflect the one that has lapsed. If the premises has a modern licence that was operated well by the previous licence holder, then this should be a more straightforward process. Otherwise, a new application may attract objections. Whilst the new application is being processed, continuity of business can be provided either by trading with non-licensable activities only, or possibly by using the temporary event notice system for licensable activities.

In our experience, a lapsed licence often remains undiscovered for months, if not years, and often comes to light only when it is the subject of an application being processed by the local authority. By that time, the only avenue open is to apply for a new licence from scratch and that process can be lengthy, expensive, and the outcome never guaranteed.

Pre-emptive steps

There are several things that can be done to preserve a premises licence in advance of dissolution or insolvency taking place.

If you know that a lapse is imminent, there is no need to wait – a transfer application to a solvent entity can be lodged at any time.

If you are a landlord letting commercial units to hospitality operators who typically hold the premises licence, you should consider whether it would be beneficial to hold a ‘shadow premises’ licence in the background to ensure your property continues to be commercially attractive to other potential new operators. This can be applied for at any time, and you do not have to wait for any ominous signs before doing this.

On a similar note, if you are landlord of a unit containing a licensed premises, you could consider registering a S.178 Notice with the Licensing Authority.  This requires them to notify you of any changes to the licence, such as applications to change the DPS, vary the hours or if the licence is subject to Review.  Whilst a Licensing Authority wouldn’t automatically know of the dissolution of the holding company, it can be a useful tool for keeping up to date more generally about the health of the licence.

If you would like further advice and assistance in relation to any of the above, please contact Felicity Tulloch / Dermot Preston