Lapse of licence under section 27

By Peter Coulson

- Last updated on GMT

Related tags Premises licence Bankruptcy

Coulson: insolvency means losing your licence
Coulson: insolvency means losing your licence
The economic downturn has thrown up some legal traps in the licensed trade recently, principally in terms of the premises licence itself, says Peter Coulson.

The economic downturn has thrown up some legal traps in the licensed trade recently, principally in terms of the premises licence itself.

While at first sight from a financial viewpoint it may seem sensible to try to reach an arrangement with creditors — indeed it is recommended by some practitioners — the result can be devastating. But the terms of the Licensing Act and the lease under which the property is held may act against you in these circumstances.

In the old days, bankruptcy itself was not a bar to holding a justices' licence. It might be taken into account by the bench, but it did not automatically void the licence.

The new Licensing Act changed that entirely. Now, if the holder of a premises licence "becomes insolvent" the licence automatically lapses. It is important, therefore, to know exactly what the phrase means.

According to the Act, an individual becomes insolvent:

• On the approval of a voluntary arrangement approved by him

• If he is adjudged bankrupt or has his estate confiscated

• If he enters into a deed of arrangement or trust deed on behalf of his creditors.

So it is no longer possible to hang on to the licence by saying that formal bankruptcy proceedings have not taken place. Other forms of insolvency action will technically trigger the lapse of the licence, and steps have to be taken immediately to transfer the licence to someone else, if at all possible.

That is made even more difficult if there is a lease in existence that has a clause covering similar circumstances. It is impossible to give a

global explanation on this, because leases do differ, but in many there is a condition that the lease itself de-termines on insolvency. So not only will the licence be removed, but actual possession of the property is put in jeopardy.

This aspect is, however, not as automatic as the licensing issue. It may be possible to reach some sort of agreement with the lessor, especially in the current climate. The downturn means that even lessors do not want to lose rental income on a technicality if there can be a compromise.

But it does mean that proposals on voluntary arrangements have to be considered in the light of what happens to the licence. If there is someone else who can take on the premises licence on your behalf, well and good. But if you are a sole trader, this could mean the end of the line.


Price reductions

Q. If we decide to offer beer or spirit price reductions for certain slack times, will we be breaking any current law on encouraging binge drinking?

I have read a great deal about Government controls on promotions.

A. This is only part of your letter, but from what you have told me

I do not think this is an irresponsible promotion, but simply a way of building business.

The requirement to have fixed price marking in pubs was relaxed after the repeal of the Price Marking (Food & Drink Services) Order last year, which specifically covered price lists and their display in considerable detail.

So as long as customers are made aware of the timing and limitations on any special offer, you are at liberty to encourage additional custom by making temporary reductions, and to display these on or even outside the premises.

However, be aware that in the current climate, any drinks promotion can attract the attention of the police and the local authority, so be prepared to have questions asked and to justify the policy on economic grounds, as other high-street traders do.

What pub notices do we need?

Q. I went into a neighbour's pub recently and saw a 1964 Licensing Act notice with spirit quantities, gaming, drinking up, children etc. Are they still valid?

A. The 1964 Licensing Act has been repealed, so any notice that still quotes it is bound to be somewhat out of date. But there are some announcements which are still required.

First of all, anything to do with the premises licence is probably on the licence summary and does not need to be repeated on a separate notice. The smoking ban requires a notice or notices that comply with the regulations and all pubs must have these.

The key requirement with regard to spirits is that you must still show the measures used for gin, rum, vodka and whisky in the premises. Failure to display some kind of notice that can be read by customers is an offence under trading standards law. A separate, small notice on the back bar would be sufficient.

With regard to gaming, it would be best to dispense with the old restrictions as they have not been relevant since September last year. Drinking-up time no longer exists and your customers are subject only to any closing time that might have been imposed.

Job sharing

Q. We have a young male member of our barstaff who is living with one of our former barmaids. He has suggested to me that if for some reason he is off work or doing another job, his girlfriend could stand in for him and I would not need to account for PAYE, insurance etc, because it would not be a formal employment arrangement. Is this possible?

A. I have heard stories about this type of arrangement (eg function staff for dinners, hirings and events) but this seems to me to represent merely an attempt to get round the employment laws by a form of job sharing.

You do not say if the young lady has other employment, but when you are taking on any individuals to work for you, unless there is a clear reason for treating them as self-employed (such as window cleaners, plumbers etc) then they have to go on the payroll.

I do not think that Revenue & Customs would consider that one individual could stand in for another in terms of income without that money being properly taxed. Clearly, if you agree to pay him for the time she works, then that would be a contract for services provided by him. If you pay her direct, then the normal requirements of employment law will operate and you will have to account for her time and money.

Too many problems. Pay them both direct on a PAYE arrangement.

Related topics Licensing law

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