Company insolvency and the Traffic Commissioner system

When a company holding a Goods Vehicle Operator Licence faces an insolvency, several important consequences arise that can significantly impact the business’s operations and future. Understanding these consequences is crucial for anyone involved in the transport industry and for Insolvency Practitioners.

What is a Goods Vehicle Operator Licence?

Broadly speaking, a Goods Vehicle Operator Licence, often referred to as an “O licence,” is required for the lawful operation of vehicles over 3.5 tonnes for hire and reward or for the use of public service vehicles on public roads for hire and reward. The Traffic Commissioner, appointed by the Secretary of State for Transport, oversees the regulation of these licences across the UK.

Traffic Commissioner powers

The Traffic Commissioner has extensive powers, including granting or refusing applications for operator licences, attaching conditions, revoking, suspending, or curtailing licences, and making findings related to Transport Managers. These powers are crucial in maintaining the integrity and compliance of the transport industry.

Insolvency and the O Licence

When a company faces an insolvency event, the Traffic Commissioner has specific guidelines to follow. Regulation 31 of the Goods Vehicles (Licensing of Operators) Regulations 1995 allows the O licence to continue despite the insolvency event. The Traffic Commissioner may direct that the licence shall not be treated as terminated, allowing the administrator to carry on the trade or business of the licence holder for up to 18 months, in special circumstances, or 12 months.

Administrator’s role

Most commonly, the O Licence features in administration where the Administrator may be continuing to trade with a view to selling the business.  The Administrator plays a vital role in deciding the future of the transport business. They must determine whether to continue the business or surrender the licence and return the O licence discs to the Traffic Commissioner. If they choose to continue, an application under Regulation 31 is necessary. Whilst the licence itself is not transferable from one entity to another, mechanisms are in place to update or reapply for a licence under new ownership. Awareness and understanding the value of the O Licence is crucial to determining next steps for an Administrator.

Trust and compliance

The Traffic Commissioner system is based on trust, and licence holders must have substantial financial resources before and during the currency of an O licence. Insolvency often means these rules are no longer being complied with, and proactive reporting of changes to the Regulator is required. Failure to address the O licence can lead to a Traffic Commissioner Public Inquiry on grounds of loss of good repute, financial standing, and possibly unlawful operation.

Early decisions and options

Early decisions about the future of the Operator Licence are crucial. The Traffic Commissioner may exercise various options where an appropriate approach and application are made. The system is sophisticated and can cater for most eventualities arising before or during an insolvency.

How we can help

Insolvency is complex with significant consequences for the holder of a Goods Vehicle Operator Licence. Understanding the role of the Traffic Commissioner, the Insolvency Practitioner’s responsibilities, and the importance of trust and compliance can help navigate this challenging situation effectively.

If you need guidance on Goods Vehicle Operator Licences or insolvency matters, please contact: tom.docherty@andersonstrathern.co.uk or gillian.murray@andersonstrathern.co.uk