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Standing firm on financial standing

30th January 1997
Page 31
Page 31, 30th January 1997 — Standing firm on financial standing
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Which of the following most accurately describes the problem?

The last quarter of 1996 saw the appointment of administrative receivers over the assets of two large and prominent road northern haulage companies. The

road transport industry is unique in that whenever a large operator is in financial difficulties tens, if not hundreds, of small companies feel the draught. Dozens of owner-drivers and small hauliers are facing financial difficulties and some are Facing outright ruin as a result of the recent failures.

How can this happen when the financial standards for obtaining an Operator's Licence are supposedly so strict? An EU directive requires all transport operators throughout the European Union to be of "appropriate financial standing". That means that they must show available capital and reserves at any time of at least 3,000 ECUs per vehicle (about £2,500). That requirement is not necessary just to obtain a licence—the requirement exists throughout the whole time a licence is held. If an operator is not of adequate financial standing because of adverse trading or for any other reason he should notify the Traffic Commissioner. However, in practice, few, if any, ever do. There are no mechanisms by which the Area Traffic Offices can monitor financial standing, nor is there any requirement to submit accounts. If a limited company fails to submit audited accounts to Companies House within a specified period the company is struck off the register. Should Government consider a similar requirement for transport operators?

This would demand additional staff at the Traffic Area Offices. More importantly, it is quite common for directors of failed transport companies to set up new businesses—

often trading with the same vehicles—immediately after the first Failure. The Traffic Commissioners have wide powers to disqualify directors from holding or obtaining 0-licences, but they are rarely exercised against directors who have shown total financial incompetence in running a business. In future operators should expect Traffic Commissioners to take more care when considering fitness and repute. Ironically, when dealing with the appeal of John Dee Ltd five years ago, the Transport Tribunal said just that, It's high time the words were backed up with some action.

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