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Money makes the wheels go round

11th March 2010, Page 26
11th March 2010
Page 26
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Page 26, 11th March 2010 — Money makes the wheels go round
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Which of the following most accurately describes the problem?

Holders of standard 0-licences must now prove they have nearly 25% more money available for every vehicle they run.

Words: Tim Ridyard

The news that minimum amounts of ready funds required to meet financial standing have risen by almost 25% has left operators agog

They might be forgiven for wondering what they had done to deserve it. especially at the tail-end of a vicious recession that has caused many firms to collapse UK-only operations that do not feel linked to a valuation based on the euro have particular cause for grievance. Since the increase was applied only to holders of standard 0-licences (national or international) the gulf with restricted 0-licence holders rose markedly.

Few would argue against the fact it is right for operators to have enough money to look after their vehicles properly. and not be able to walk away from their financial problems leaving creditors in their wake.

However, there is a feeling that there is a need for more clarity. What counts as an 'available resource is a blurred concept, and the rules feel unnecessarily oppressive.

Where is the logic in denying a safe operator the right to operate vehicles through a lack of financial standing, when other operators with sufficient funds lack competence to manage their fleets properly?

The Schedule 3 Goods Vehicles (Licensing of Operators) Act 1995 states the applicant for, or the holder of, a standard licence is of the appropriate financial standing if he has available to him sufficient financial resources to ensure the establishment and proper administration of the road transport undertaking carried on, or proposed to be carried out under the 0-licence.

A Transport Tribunal case has defined available funds as those that are capable of being used, at one's disposal, within one's reach, obtainable or easy to get.

It has described an operator as having available financial resources if there is: • money in the bank not already needed for the payment of debts in the ordinary course of the business; • an overdraft with an undrawn balance, • easily collectable debts; • assets from which money can be easily obtained on a sale at short notice without any adverse impact on the business: • some other way in which to come up with money at short notice.

Where there is cash in the bank, an overdraft or other unclrawn credit. there will be no difficulty.

It becomes more involved if factoring/discount invoicing arrangements exist. The business can meet all its financial commitments, including maintenance, but cannot satisfy the financial rules, making operators feel the rules are divorced from reality.

If they are intended to ensure vehicles operate in a well-maintained state, why should units be taken off the road if financial standing cannot be satisfied but they can run safely? The sums actually spent on maintenance are not taken into account when the finance is calculated.

Good regulation demands simple rules that are easily understood and capable of being complied with.

An operator, without the need for professional advice or assistance, save in complex cases, should be able to apply for an 0-licence or an increase without undue complication.

Applicants for new 0-licences, or variations in existing ones, regularly encounter objections or queries from the Central Licensing Unit in Leeds. to which all applications are now sent. Some objections are caused by simple mistakes and failure to follow clear guidelines. The same errors recur • a failure to submit original bank/other documentation (traditional bank statements have been replaced with online banking data. but certified copies of bank ledgers need to be submitted); • submitting financial evidence other than in the name of the 0-licence-holder (money must be readily accessible by the licence-holder, except where an individual swears a declaration guaranteeing the availability of funds, other than to a limited company), providing evidence of funds that are real, but which are not 'readily accessible',

iS evidence submitted is insufficient, not only for any increase in licence but also inadequate for existing authorisation (a case of shooting yourself in the foot a not uncommon problem).

• The financial evidence submitted suggests the operator has been operating as a separate legal entity and unwittingly has failed to apply for a new licence in the name of the correct entity. An example is where the 0-licence was awarded to a sole trader who has since formed a limited company a new licence should have been applied for.

Operators will not think about financial standing on a day-to-day basis, unless one of these situations arise;

• they are applying for a new 0-licence or a variation, * the operator has been called to a public inquiry for maintenance issues. The Traffic Commissioner will always ask that financial standing is proved as there will be a suspicion that maintenance shortcomings may derive from lack of financial resources

• when the TC has discovered that financial standing may be an issue due to the company going into administration or bankruptcy of a partner or director, • the licence is approaching its five-year renewal TCs are required to check financial standing is fulfilled every five years Operators have to complete a declaration, although production of supporting evidence isn't normally needed, • for some other reason, such as a routine financial check Having a difference in the financial requirements between restricted and national licences is arguably indefensible. There is no difference in the cost of maintenance Why should a business transporting its own goods require 'X' amount for its fleet, but the transport business of identical size next door has to access more cash if it is to transport the goods on its behalf? The gulf is even wider when the cost of employing a transport manager is included.

Tim Ridyard is a solicitor, partner and road transport lawyer at Ipswich-based Barker Gotelee solicitors. Email: tim.ridyard@barkergotelee.co.uk

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People: Tim Ridyard
Locations: Ipswich

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