Business

Handling a Change in Ownership

By Cornerstone SupportMay 11, 2016
 

Changes to the ownership structure of a licensed collection agency can occur for a variety of reasons and are a regular part of the corporate life cycle. Unfortunately, the statutory regulations for the majority of jurisdictions prohibit the transfer of debt collection licenses. On top of that, the inflexible language of the provisions in almost all instances does not allow for an interim or transitional license, resulting in a gap period during which the ownership structure will have changed, but the new licenses will not have been processed. While the significance of the change and structure of the transaction are factors that help determine the specific action necessary, some level of re-licensing is almost always required.

There are two common types of transactions:

  1. Stock Transactions – There are benefits to a stock transaction with respect to the individual state licensing requirements. Corporate registrations required as a prerequisite to obtaining state debt collection licenses are not affected in the event of a stock transaction – they are transferred seamlessly to the buyer, saving valuable time and money.
  2. Asset Transactions – In an asset transaction, the seller retains ownership of the corporate entity and is generally responsible for unwinding it appropriately. The buyer must either create a new corporate entity or use an existing corporate entity for the transaction.

Dealing with the licensing issues surrounding changes to ownership structure should not be taken lightly. You should fully understand the impact that the proposed transaction has on licensing and develop a strategy to minimize any related exposure prior to closing a transaction.

There are many additional details that need to be considered to ensure that you remain continuously and properly licensed. Give us a call and let us guide you through this process.

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