In recent times, with the various economic and financial pressures impacting on the hospitality industry, it’s not uncommon for External Administrators to be appointed to administer Licensees and their Licensed Business.
What is often overlooked when an External Administrator is appointed to a Licensee is the protection and continuation of the various licences that are required to operate the Licensed Business.
This update addresses various issues that arise out of the Liquor Control Reform Act 1998 (the LCRA) and Gambling Regulation Act 2003 (the GRA) that must be considered by an External Administrator prior to being appointed to a Licensee.
In accordance with Section 66 of the LCRA, the Liquor Licence will lapse within 90 days after the Licensee becomes an administered body corporate unless the External Administrator is endorsed on the Liquor Licence.
An External Administrator of a Licensee must obtain the approval of an Application for Endorsement from the Victorian Commission for Gambling and Liquor Regulation (the VCGLR) under Section 80 of the LCRA to be endorsed on the Liquor Licence prior to carrying on the business operated under a Liquor Licence. In addition, an External Administrator will need to have completed the Licensees’ First Step and Responsible Service of Alcohol courses (the New Entrant Training) before the VCGLR will approve the Application for Endorsement.
Following the approval of the Application for Endorsement, the person or entity endorsed on the Liquor Licence will be permitted to continue to operate the Licensed Premises and to protect this valuable business asset.
It is important for the individual or entity seeking endorsement on the Liquor Licence to understand that it will become liable under the LCRA as if that person or entity is the Licensee (Section 86 of the LCRA).
The liability of the endorsed individual or entity extends to breaches of the LCRA and more particularly, offences for which a Licensee may be found liable under Part 8 of the LCRA.
The Application requirements are similar to those required for the approval of a Director of a corporate Licensee in that, the following documents will need to be lodged with the VCGLR:
A copy of the Application will be forwarded by the VCGLR to the Victoria Police for comment and under Sections 83 and 84 of the LCRA, the Commissioner of Police may object to the Application on the basis that the Applicant is unsuitable to carry on the business under the Liquor Licence.
An External Administrator seeking endorsement on a Liquor Licence should also be aware of the following matters under the LCRA:
in an accessorial capacity where the officer/s authorised or permitted the offence to occur or was knowingly concerned in the commission of the offence (Section 53A); and
for failing to exercise due diligence in the conduct of the Licensed Premises (Section 53B and 53C).
In circumstances where a Licensee Tenant vacates the Licensed Premises and the tenancy has expired, the Licensee can apply to the VCGLR under Section 64 of the LCRA requesting to be released from its obligations as a Licensee under the LCRA.
An External Administrator can, in addition to lodging an Application for Endorsement, apply for the approval of a Nominee under Section 54 of the LCRA.
The purpose of seeking approval of a Nominee is to limit the liability of the Licensee in the event that the Licensee is charged with offences under the LCRA.
Where a Nominee is not approved, it is open for each Director of a corporate Licensee to be issued with an infringement notice for each offence.
The person or entity endorsed on the Liquor Licence will be authorised to apply for the renewal of the Liquor Licence and otherwise deal with the Liquor Licence as if they are Licensee. This includes the authority to make any necessary applications for transfer or variation of the Liquor Licence.
In light of the significant risk and liability assumed by an External Administrator in becoming endorsed on the Liquor Licence, we strongly recommend that External Administrators that deal with distressed hospitality venues, complete (and in the case of a corporate administrator, a Director) the New Entrant Training prior to being appointed to a Licensee.
The External Administrator will gain a working knowledge of the obligations and responsibilities of a Licensee under the LCRA; and
The External Administrator will be in a better position to lodge an Application for Endorsement and have that Application granted in a shorter period of time than if it had not completed the New Entrant Training.
In relation to Licensed Premises with Gaming Machines and the requirements relating to External Administrators under the GRA, an External Administrator must seek approval of the VCGLR to be endorsed on the Venue Operator’s Licence (the VOL) under Section 3.4.24 of the GRA.
Section 3.4.24(3)(d) of the GRA, states that the endorsement of an External Administrator on the VOL is necessary to permit the continuity of the VOL and the operation of Gaming Machines at the Licensed Premises in circumstances where the Venue Operator/Licensee is being externally administered.
In terms of the application process, the request by an External Administrator for endorsement on the VOL under the GRA should be lodged with the VCGLR at the same time as the Application for Endorsement under the LCRA.
An External Administrator endorsed on a VOL under the GRA is regarded as being the Licensee for the purpose of compliance with the GRA.
Insolvency practitioners who are involved in the administration of distressed hospitality businesses must be aware of and understand the obligations of External Administrators and the essential steps and application requirements to enable the continuation of the Licensed Business and the protection of valuable assets in respect of any Liquor and Gaming Licences which enable the Licensed Business to continue to operate.
External Administrators should apply to the VCGLR for a ‘semi-permanent’ approval under the LCRA and GRA prior to their appointment to administer a Licensee in order to speed up the processing of any Applications for Endorsement.
The author has extensive experience dealing with all aspects of Licensed Liquor and Gaming Premises including Sales and Purchases, all types of Gaming and Liquor Applications and the defence of Infringement Notices and disciplinary proceedings.
For further information on how Pointon Partners can assist you to comply with the requirements of the Liquor Control Reform Act 1998 and Gambling Regulation Act 2003, please contact Nicholas Brand or David Mazzeo on 03 9614 7707.