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Topic of the Month
March 2009

Duties to the Traffic Commissioner when a business fails

Unfortunately, as more and more businesses go under, it all too easy to forget what the obligations are in relation to the operator's licence. A recent Transport Tribunal case has led to the Tribunal issuing preliminary guidance on the relationship between operator licensing and the position of a company that has gone into administration.

There is provision under Regulation 31 of the Goods Vehicles (Licensing of Operators) Regulations 1995, that where an individual, who is the holder of an operator's licence,  is declared bankrupt or in the case of a company, the holder of the licence, goes into liquidation, an administrative order is made, or there is the appointment of a receiver or manager of the business, then the Traffic Commissioner may direct that the person carrying on the business is to be treated as though he were the holder of the licence and to such an extent as mentioned in the direction, for a period, of usually, up to 12 months.

The Transport Tribunal have said that if an administrator decides to carry on the road haulage business, either personally or by appointing managers, then there must be an application made under Regulation 31.  Traffic Commissioners should be provided with a copy of any agreement where an administrator decides to appoint a manager and the agreement must be for the manger to manage the business of the company in administration and not to use the vehicles for the purposes of some other business.

The Transport Tribunal decision highlights, that in most situations, directors of companies that go into administration will have been aware of the financial position for sufficient period of time to advise the Traffic Commissioner, as they are obliged to do, of a change in material circumstances, ie that there is a change in the company's financial position.   The decision warns that failure to advise the Traffic Commissioner of change of material circumstances, may lead to adverse conclusions being drawn against the directors and that if the administrator fails to notify the Commissioner under Regulation 31, he should not be surprised if the company  finds itself at a public inquiry for loss of repute, loss of financial standing and perhaps unlawful operation.