News The Rise of the CVA and Licensing

What to look out for

With the rise in the number of “landlord only” CVAs what, from a licensing perspective, do operators need to be aware of when a company is nearing the point of entering into a Company Voluntary Arrangement (“CVA”).

The Premises Licence

By virtue of the Licensing Act 2003 upon a company entering into a CVA, the Premises Licence will lapse with immediate effect.  The CVA takes effect from the moment that the company’s creditors vote in favour of the CVA (requiring votes in favour of the CVA by at least 75% of its creditors by value).

There are therefore 3 options with the Premises Licence.  The first being to simply allow the Premises Licence to lapse, so no licensable activities can continue (this is most likely to be the case where a licensed premises is to close with immediate effect upon the start of the CVA).  The second option is to transfer the Premises Licences, prior to the CVA, to a company which is not going into a CVA, but this may be easier said than done in a smaller hierarchical company, and also by doing so may put any Premises Licence Holder in breach of its lease obligations.

The third and most common option is for the Premises Licences to be transferred immediately after the CVA.  Once a Premises Licence lapses on a CVA, it is “resurrected” upon a transfer of the Premises Licence within 28 days of the CVA.  Transfers can have immediate effect in such instances (although the Police still have 14 days to object).  By providing for the transfers to have immediate effect, the Premises Licences are “resurrected” immediately upon receipt by the Licensing Authority.

If the creditors meeting can be timed appropriately there may be no down time at all in terms of alcohol sales.  The vast majority of Licensing Authorities now accept transfer applications online or by email and, therefore, these can be submitted immediately, and we have been involved in several of these CVAs recently, including Jamie’s, Carluccio’s, Prezzo and Byron where we have assembled a large team with applications pre-prepared ready to submit them all within the space of an hour or so upon the CVA being approved.

Under the Licensing Act 2003, there is no requirement to provide the consent of the outgoing Licence Holder to the transfers, because the transfer is from a company which is the subject of a CVA.  The Licensing Authorities may require evidence of the CVA, and the Chairman’s Report from the CVA meeting will suffice.

Gaming Permissions

Licensed premises which only have up to 2 machines would have a Notification for these Category C and Category D machines and, upon a transfer application being made of the Premises Licence, the Newco would also need to issue a separate Notification for these 2 machines.

Licensed premises which have more than 2 Category C and Category D machines will have a Licensed Premises Gaming Machine Permit, and these would lapse upon the transfer of the Premises Licence to the Newco and, therefore, again, there would need to be a transfer of the Licensed Premises Gaming Machine Permit to the Newco.

Pavement Licences

These are more complicated, and the terms and conditions of each Pavement Licence should be studied carefully.  We have known a couple of Licensing Authorities where a provision is built into the terms and conditions of the Pavement Licence, which means that the Pavement Licence ceases to have effect upon the company entering into a CVA.  If this is the case, then (if possible) contingency plans should be put into place, when appropriate to do so, by an application being made for a new Pavement Licence in Newco’s name prior to the CVA.  

There may however be a period where the tables and chairs can no longer used whilst a new application goes through its consultation process.  However, the vast majority of Pavement Licences do not contain any such provisions and, therefore, despite the company in whose name the Pavement Licence is held entering into a CVA, this does not mean that the Pavement Licence lapses but, instead, it remains in the name of the same legal entity, albeit now subject to a CVA, and the area can continue to be used for tables and chairs. 

We have known Councils argue that the Pavement and Premises Licences need to be in the same name, but there is no requirement in law for the Pavement Licence to be held in the same name as the company holding the Premises Licence.

Care does need to be taken however when a decision is reached about the future of any business, and whether it is to be sold, since many Pavement Licences do contain a restriction which does not permit the transfer or assignment of a Pavement Licence.  The only option in such circumstances is therefore for the purchaser to make a fresh application for a new Pavement Licence, which can take between 4-8 weeks with the consultation period on the application.

Summary

The key lesson is to plan well ahead, time the creditors meeting to minimise any downtime for the sale of alcohol at the premises, by ensuring that any period during which the Premises Licence has lapsed is kept to a minimum.  Have all the transfers ready to be lodged immediately upon the approval of the CVA, so that the Premises Licences are resurrected immediately upon the transfers being lodged with the Licensing Authority.

For further information on CVAs and licensing contact partner Jonathan Smith on 0115 953 8500.