Buying or Selling your Broker Business?
2020 is undoubtedly a year like no other. At the outset of the new year many businesses were naturally worried about the impending impact of a ‘No-deal’ Brexit. Little did we know that there was a bigger beast in the form of the Covid 19 global pandemic lurking around the corner!
The year 2020 is also a year that heralded a series of mergers, acquisitions and other consolidations. It is therefore an appropriate time to examine the, often overlooked, key regulatory requirement to notify the Central Bank in circumstances where you are contemplating buying or selling a broker business in the financial services sector.
Please note that, for the purposes of this article, I will be discussing the regulatory requirement of investment brokers to provide prior notification of the Central Bank pursuant to the Investment Intermediaries Act 1995 (as amended).
Have you notified the Central Bank?
Buying or selling an investment broker business in the financial services sector requires you to provide prior notification to the Central Bank. As a regulated financial services firm, you have a legal obligation to provide notification to the Central Bank where the transaction involves a change of ownership of shares or voting rights. This is generally known as an “acquiring transaction”.
Time is of the essence
If you are contemplating buying or selling a financial services firm, it is essential that you to build enough time into the schedule for completion of the deal to obtain Central Bank approval for the proposed acquisition or disposal.
The time required by the Central Bank to assess and approve the proposed acquisition or sale should be carefully factored into your plans from the outset. If you do not factor in the period of time that it will take the Central Bank to review your notification it may delay the best-laid plans.
How long will the process take?
The statutory time period for the assessment of the Acquiring Transaction Notification Form (ATNF) commences on the date the Central Bank receives the complete notification and lasts for 3 calendar months, unless a request for further information is made to you by the Central Bank.
If a request for further information is issued and upon a satisfactory response to same, the statutory time period for the assessment of the ATNF will be 3 calendar months from the date of that response.
What transactions require prior notification to the Central Bank?
You are required to provide prior notification to the Central Bank in relation to the acquisition or disposal of a ‘qualifying holding’ in your investment broker business.
What is a qualifying holding?
A qualifying holding is:
(i) any direct or indirect shareholding that reaches or exceeds 10%, 20%, 33%, 50% or when a firm becomes a subsidiary;
(ii) any direct or indirect disposal that reduces a shareholding below 10%, 20%, 30%, 50% or when a firm ceases to be a subsidiary.
What information and documentation must be provided to the Central Bank?
- Acquiring Transaction Notification Form (ATNF) – The ATNF is a detailed and technical form that will require you to include a detailed overview of the proposed transaction, how the transaction will be funded as well as how the internal management of the target entity will be affected.
- Individual Questionnaire (IQ) – Each new appointee to the Board of the target entity will be required to complete and submit an IQ.
- Organisation Chart illustrating the current and proposed ownership structure
- Certified copy Share Register(s)
- Letter(s) from acquirer/disposer outlining intention to acquire/dispose
What are the consequences of not providing prior notification to the Central Bank?
The consequences of not providing prior notification of a transaction to the Central Bank are very serious.
The transaction is of no effect to pass title to any share or any other interest. Any exercise of powers based on the transaction is void as a matter of Irish law and penalties may apply.
How can McCole & Co. Consultants help?
Acquiring transaction approvals can be complex, technical and time consuming for all parties involved. At McCole & Co. Consultants, we will take you seamlessly through each step of the Central Bank’s notification procedure. We will clearly outline to you the relevant requirements to ensure your transaction is approved in a timely manner.
If you have any questions or queries arising from this article, please contact Dermot McCole: firstname.lastname@example.org