I run a haulage company and I am worried that if I enter into a pre pack administration or CVA then I will lose my Vehicle Operators Licence (OL)
Vehicle Operators Licence and Insolvency
If a company gets into difficulties then directors, and their advisors, sometimes think that a pre pack administration is the answer to all their problems. "Lets discharge the debt and buy back the assets of the company and start again". Whilst this is possible, it is never as simple as that. Most particularly where a licence to operate has to be granted for the firm to continue. If there is a change of ownership then many licences become void and a new one has to be applied for. Nowhere is this problem more obvious than in the circumstances of a haulage company that becomes insolvent. One of the requirements of an Operators Licence (OL) is that the firm has sufficient working capital to operate. In a pre pack administration how can the firm convince the licensors that the new company has such capital?
In a pre pack or sale the new entity that is acquiring the assets of the insolvent entity ought to apply for a new operator licence as early as possible - we recommend at least 8-12 weeks prior to the completion of the sale. Administrators should consider applying to the Traffic Commissioner under specific rules - for permission to continue to operate vehicles during the administration of the insolvent entity. Is this always practical?? This is a complex legal area and we would advise taking legal advice if you are considering a pre pack or sale.
So what about if the firm enters into a CVA?
Simple, there is no change of ownership and the firm can continue to operate under its licence. In fact one of our clients (see haulage CVA case study) was advised that the firm could be pre packed and the operators licence would not be a problem. Instead, the firm preferred to go down the CVA route and is doing very well now.
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Please note that the guide was written pre Covid-19 and there are some likely changes to insolvency rules regarding wrongful trading. Please see this page here.