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25 February 2009

Figures for the third quarter of 2008 highlighted that pubs, bars, restaurants and hotels have been one of the hardest hit by the economic slowdown. The results for Q4 2008 (analysed on 6 February 2009) saw an increasing number of hospitality and leisure administrations, with 251 insolvencies; a 54 increase on the same quarter last year. This is reflected in the number of insolvent hospitality and leisure companies, which has increased by 95 in the past two years.

As an insolvency practitioner these figures are likely to mean that business is booming at the moment. However, there are certain things that you should note in relation to this particular sector before insolvency proceedings are instituted:

  • Pubs, bars, restaurants and hotels all require a premises licence under the Licensing Act 2003 (the Act). This is because most activities that take place on these premises are licensable activities. Licensable activities include the sale of alcohol, the provision of entertainment, and after 11.00pm the sale of hot food
  • The holder of a premises licence may be either a company or an individual
  • If the holder of a premises licence becomes insolvent the licence will lapse. Insolvency is widely defined under the Act to include the approval of voluntary arrangements, bankruptcy orders, liquidations and administrations
  • The lapse of a premises licence precludes any further trading in respect of licensable activities at those premises
  • However, there is protection afforded to insolvency practitioners under the Act so that he may continue trading in respect of licensable activities
  • The insolvency practitioner may, during the initial seven day period from when a premises licence has lapsed, give to the relevant Licensing Authority a Notice in respect of the licence. This effectively involves the insolvency practitioner taking on the responsibility for the Premises Licence on a temporary basis until it can be transferred to the third party

The fee that accompanies the Notice is only £23. However, should you fail to serve the authority with a Notice, the licence will lapse and you will therefore be unable to carry on trading at the premises in respect of licensable activities - imagine a bar with no alcohol!

Should you find yourself in this situation, in order to commence trading in respect of licensable activities you will have to make an application for a new premises licence. This can be slow and costly!

You must also be cautious not to carry out licensable activities without a premises licence. To do so would be in breach of the Act and may lead to imprisonment for a term not exceeding six months, or to a fine not exceeding £20,000, or both.

Our experienced Licensing team can assist with all licensing aspects that may arise throughout the insolvency process and ensure that you do not fall foul of the Act.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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