Protecting Premises Licences in Insolvency

Some, however, have been able to take advantage of the misfortune of others and expand their businesses by taking on defunct premises.

The lucky few who are able to acquire new premises in these circumstances, are often, however, hampered by the failure to protect the Premises Licence, attached to the individual premises, and which permits the sale of alcohol and the provision of entertainment. Equally, licensed businesses which take the pre-pack route to survival can also come unstuck if insufficient regard is had to preservation of the licence.

The Licensing Act 2003 provides that if a Premises Licence Holder, whether they be an individual or a business, suffers “an insolvency event”, then the licence lapses. The triggering event might be the appointment of an administrator, entering into liquidation, the approval of a VA or being a judged bankrupt. The only way in those circumstances to secure the licence, which is obviously a significant asset, is to transfer it elsewhere within 28 days of the event. Failure to do this relatively simple task will result in the licence being lost, no matter what the circumstances are.

Once a licence has lapsed, the only way to restore it is to start again and make a new application. Often the presumption is that because a licence has existed in the recent past then it ought to be a straightforward process to restore it, but this is misconceived. Starting again means that the licence can be objected to by local residents, or the Police and others. The circumstances in an area might have changed since the previous licence was granted, perhaps decades ago. Neighbours may see the opportunity to settle scores with what they see as nuisance premises. There is never a guarantee that a new licence will be granted, or if it is, in such favourable terms. What might have been acceptable in the past in terms of conditions attached to a licence will have changed, potentially imposing additional burdens on a new operator. Applying for a new licence involves not only cost, but also time. The process can, if the application is objected to, take a couple of months. In those circumstances, a prospective buyer isn’t likely to commit until they have a satisfactory licence.

Protecting a Premises Licence at the earliest opportunity can help preserve value, reduce cost and uncertainty and could potentially make a significant difference to the outcome for creditors and incoming operators alike. If you are an insolvency practitioner (or if you are an operator looking to take over a licenced premises of an insolvent business) please contact Richard Arnot for expert advice.