One of the more complex aspects for applicants seeking Code Powers from Ofcom to consider is that of funds for liabilities. The idea behind funds for liabilities is that there is financial provision made by the applicant prior to it commencing operations against the possibility of it subsequently going ‘pop’, leaving other parties facing liabilities arising from its acts/omissions. Its aim is to avoid some of the problems that arose with the UK cable boom in the 1990s and its subsequent bust which saw various operators going to the wall with unfinished works and apparatus and infrastructure in need of removal.
For many start ups giving consideration to the possibility of failure and making provision for it before they can even commence operations is an unattractive proposition. No one wants to start a business by considering its possible failure. It is however something that has to be done as part of the application under s.106 of the Communications Act 2003 for a direction applying the Electronic Communications Code. The requirements for funds for liabilities arises under Regulation 16 of the Electronic Communications Code (Conditions and Restrictions) Regulations 2003. Those regulations detail the potential liabilities and circumstances that need to be addressed.
Ofcom does have Guidelines on Assessing Funds for Liabilities under Regulation 16 of the Electronic Communications Code (Conditions and Restrictions) Regulations 2003 that can be found via this link. These guidelines are a useful starting point for an applicant considering this aspect.
Determining what may be an appropriate level of funds for liabilities provision and how it should be made is something that requires careful consideration of the nature and scope of the proposed operation. One also has to take account of financial reality in terms of what provision a potential start up business might afford to make. There is not therefore a ‘one size fits all’ funds for liabilities provision and each application needs careful consideration to ensure that an appropriate level of provision is made.
There is no requirement that funds for liabilities are in place before the grant of Code Powers. However, provision of those funds does have to be in place before Code Powers are exercised.
Another aspect that does occasionally appear to get overlooked is that the funds for liabilities need to be reviewed on an annual basis by a party holding and exercising Code Powers. If an applicant has been successful in its roll out, the appropriate level of funds for liabilities provision in year three of its operation may be significantly different in terms of amount and method of provision.
- advise companies on whether they are eligible to secure Code Powers;
- advise on funds for liabilities requirements;
- apply to Ofcom and secure Code Powers on behalf of companies; and
- advise new and existing Code Power operators on the extent and operation of their Code Powers and their wider regulatory responsibilities.
Contact us if we can assist you in respect of the Electronic Communications Code.