Financial standing for standard licences

The Senior Traffic Commissioner’s guidance states that “a standard licence must be of the appropriate financial standing” and that a Traffic Commissioner “must revoke a standard licence if it appears that the licence holder no longer satisfies the requirement to be of the appropriate financial standing.”

How is financial standing demonstrated?

Usually, financial standing is demonstrated by bank statements and ‘cash in the bank’.  However, an operator could rely on alternative methods.

Traffic Commissioners can take account of other evidence such as:

  • A bank guarantee
  • An insurance policy from a financial institution
  • Joint and several guarantees
  • Overdraft facilities
  • Credit facilities
  • Invoice finance agreements.

The Upper Tribunal has held that the availability of finance is not “black and white” and that Traffic Commissioners may also make an assessment of whether the facility, particularly credit cards, will in fact be used and are therefore “truly available” to an operator.

At Public Inquiry, Traffic Commissioners require an operator to submit 3 months bank statements to establish availability of finance. It is possible to rely on other sources for financial standing and advice and guidance should be sought.

Real assets such as property, plant and machinery can be taken into account if their disposal would not reduce the ability of the operator to operate efficiently and profitably. Where an operator seeks to rely on assets, reliable evidence of its value and proof of ownership are required.

The statutory guidance highlights that the following are generally not acceptable:

  • Cash
  • Bank letters (other than formal overdrafts);
  • Children’s accounts
  • Shares, savings bonds, PEPs/ISAs, savings certificates, insurance policies (see above), unless accompanied by a letter from an accountant/financial advisor certifying the current encashment values
  • Physical assets such as livestock or perishable goods which might reduce in value quickly will not usually be accepted.
  • Aged debt registers

What happens if an operator doesn’t meet financial standing?

The operator can ask for a period of grace to rectify the situation. The Traffic Commissioner is not obliged to grant a period of grace and the maximum period allowed is 6 months. The starting point is usually 3 months.

If the operator wishes to proceed with a period of grace, it needs to set out how the absence of financial standing will be remedied.  A Traffic Commissioner will require tangible evidence to show that financial standing can be met in the future.

What is also important, and was raised again in a recent public inquiry, is the requirement to notify the Traffic Commissioner if financial standing is not met.

It is a condition of an operator’s licence that changes in the availability of finance are notified to the Traffic Commissioner.

At a public inquiry, Traffic Commissioners will frown upon a request for a period of grace if the operator has failed to bring the lack of financial standing to the Traffic Commissioner’s attention prior to being called up.

If you are called to a Public Inquiry and meeting financial standing with your bank statements is an issue for you, it is imperative you seek advice early.

There are alternative ways to meet financial standing, but it can take time to obtain all the relevant evidence you need in time for the hearing.

Unfortunately, if you don’t present the appropriate evidence properly, your licence could get revoked.

Contact Jared Dunbar for legal advice on operator’s licences.