Monday, 30 March 2015

Small Business, Enterprise & Employment Bill - Reform of the Pub Code

This is part of a series of posts on the Small Business, Enterprise & Employment Bill that has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
This series of posts is intended to update the readers of the key changes, which should radically transform the transparency of the marketplace as regards the operation, control, ownership and risk associated to limited companies in the UK.
We have not addressed all of the issues described in our previous posts, to avoid duplication, but would welcome any queries from the reader in this respect.
The commencement of these changes is different dependant on which part of the Act is being reviewed (Section 164 of the Act defines commencement) and we have highlighted below the relevant commencement dates. Where we below stated “to be announced” this means it has not yet come into force and will commence upon the making of a Commencement Order.
The changes as set out below will be extremely important to all directors, companies and individuals with business in the future and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Jones we can advise on all matters subject to these posts.
Pub Tenant landlords and Reform of the Pub Code – COMMENCEMENT 26 MAY 2015
It is well publicised that following derestriction of the pub sector in the 1990s a new corporate phenomenon occurred, the Pub chain. This comprised large companies acquiring pubs and then entering into onerous leases with incoming tenants, with the effect that rents sky rocketed and tenant landlords often faced difficulty in making the business work.
The Act has been altered from the Bill stages and changes to the regulation of this sector now appear at sections 41 – 73 of the Act.
These reforms establish the Pubs Code Adjudicator, the implementation and powers of which are contained within Schedule 1 to the Act. The Act also requires that the Secretary of State conduct a review of the Pub Code and introduce regulations about terms of a tenancy or other agreement between a pub-owning business and a tied pub tenant within 12 months (i.e. before 25 March 2016) and requires that market rents be offered to tied pub tenants.
As stated in my previous blog, the Acto introduces an arbitration process to settle disputes between the pub tenant and the pub-owning business, where conventionally the balance of power lies with the pub-owning business (and therefore, currently, the pub tenant rarely has – or can afford – legal assistance or protection). The Bill provides for the appointment of an Adjudicator, as part of the arbitration process, to investigate the dispute and report on his/her findings and recommendations – this report is required to be published and the Adjudicator can also impose fines on the pub-owning business only (not the tenant).
There are also provisions allowing the Adjudicator to advise the pub tenant or the pub-owning business, publish the criteria adopted in reaching his/her decision (presumably with the intention of there eventually being a precedent procedure followed and adhered to in such circumstances) and the application of the Pub Code.
The use of the Adjudicator will be reviewable after 31 March 2017.
Should you have any query as regards the application of this process, at Francis Wilks & Jones we can assist in this respect.