What happens if a premises licence holder becomes insolvent?

The law states that the death or insolvency of the premises licence holder has the effect of lapsing the premises licence with immediate effect. Insolvency can come about by way of bankruptcy, IVA, CVA, dissolution of a company or winding up of a company.

Unless action is taken to protect the premises licence within 28 days, the only way of dealing with the matter is by way of an application for a brand new premises licence, which if granted, may well not be in the same terms as the licence that previously existed.

If you know that a tenant is in financial difficulties, then it may be appropriate to take pre-emptive action to transfer the premises licence in advance. However, many landlords are not party to the tenant’s finances and will not find out that a tenant has become insolvent until it is too late. In these circumstances, there is another option. This is to apply for a “shadow” licence.

What is a shadow licence?

A shadow licence is a separate premises licence which simply sits behind the existing one (in the shadows) but is in a different name. If a shadow licence exists and the tenant goes bankrupt etc and the original licence is lost, then the shadow licence can be utilised.

A shadow licence acts as a kind of insurance policy to ensure the licensed activities can continue to operate, and may well be worth the investment.