Change of corporate control
Under section 102 of the Gambling Act 2005, a change of corporate control takes place when a person (or other legal entity) either directly or indirectly:
a) owns 10% or more of the shares
b) is entitled to 10% or more of the rights to profits/dividends
c) has 10% or more of the voting power; and/or
d) is able to exercise significant influence over the management of an existing licensed operator.
In summary, it is when there is a new “controller” of the company.
For example, if a major investor joins the company or a new significant member joins a partnership.
Please see section 422 of Financial Services and Markets Act 2000 (FSMA) for the full definition of controller.
As an overview, a controller in relation to a licensed operator means a person who holds:
a) 10% or more of the shares in a licensed operator or in parent company of a licensed operator
b) 10% or more of the voting power in a licensed operator or a parent company of a licensed operator, or
c) shares or voting power in a licensed operator or a parent company of a licensed operator as a result of which the person is able to exercise significant influence over the management of a licensed operator.
The holding of shares or voting power by a person in the licensed operator includes any shares or voting power held by another person if they and the other person are acting in concert:
- in relation to a licensee with share capital, allotted shares
- in relation to a licensee with capital but no share capital, rights to share in the capital
- in relation to licensee without capital, interests:
- Conferring any rights to share in the profits of the licensee; or liability to contribute to the losses of the licensee; or
- giving rise to an obligation to contribute to the debts or expenses of the licensee in the event of its winding up (in a licensee with neither share capital nor capital).
Voting power is defined by section 422(5) FSMA20000
(a) it includes in relation to a person (H):
i. voting power held by a third party with whom H has concluded an agreement, which obliges H and the third party to adopt, by concerted exercise of the voting power they hold, a lasting common policy towards the management of the undertaking in question
ii. voting power held by a third party under an agreement concluded with H providing for the temporary transfer for consideration of the voting power in question
iii. voting power attaching to shares which are lodged as collateral with H, provided that H controls the voting power and declares an intention to exercise it;
iv. voting power attaching to shares in which H has a life interest;
v. voting power which is held, or may be exercised within the meaning of subparagraphs (i) to (iv), by a [F2 controlled undertaking] of H;
vi. voting power attaching to shares deposited with H which H has discretion to exercise in the absence of specific instructions from the shareholders;
vii. voting power held in the name of a third party on behalf of H;
viii. voting power which H may exercise as a proxy where H has discretion about the exercise of the voting power in the absence of specific instructions from the shareholders; and
(b) in relation to an undertaking which does not have general meetings at which matters are decided by the exercise of voting rights, means the right under the constitution of the undertaking to direct the overall policy of the undertaking or alter the terms of its constitution.
If you have any questions as to whether a change of control has taken place, you should seek independent legal advice.
When should you notify us of a change of corporate control?
Changes of control should be reported within 5 working days or as soon as possible by way of a key event.
Within 5 weeks of the change occurring you must either surrender the licence or apply for the licence to continue to have effect.
If you want to apply for the licence to continue to have effect, you must complete a Change of Corporate Control form and pay the appropriate fee.
Make sure you read the guidance notes before you start to fill out the form.
Operating licence change of corporate control - form
Operating licence change of corporate control - guidance notes
We must receive notification of the licence surrender or the application form and payment within 5 weeks of the change occurring otherwise we will revoke your licence.
Change of corporate control applications typically take around 12 weeks to process, providing full information is submitted.
Can I apply in advance?
Yes. Section 103 of the Gambling Act provides for this. An application can be made in respect of a person/entity who is expected to become a controller of a company.
Fees for change of corporate control
When submitting the Change of Corporate Control application, you must pay the correct fee for the application at the same time. Read the full details about the standard application fee.
Change of control
Due to share fluctuation only
Where the new controller already holds an operating licence
25% of standard application fee
Where the new controller is a financial institution that is either regulated by the FCA or which has its registered/head office in an EEA state and is regulated by its home state regulator.
25% of standard application fee
Where the new controller does not hold an operating licence
75% of standard application fee
New controller in family owned small-scale operator and:
• The operator is a private limited company
• The operator is and will continue to be a small-scale operator
• All existing shareholders are either the spouse, civil partner, child, parent or sibling of the new controller
• The new controller will not exercise any management function in connection with the gambling activities
• The new controller will not hold a higher percentage of shares in the company than any other shareholder
Regulation 34 (2) gives a provision for a reduced fee if a company is being inserted into the group structure and both the below conditions are met:
- The new controller is known to the Commission (that is, they hold an operating licence or they are a financial institution regulated in the EEA etc) and
The new controller is only acquiring 10% shares or increasing their shareholding to a 10% position and nothing else (i.e. the where the shareholding does not confer any “voting power” as defined in 422 of FSMA)
See here for examples.
Frequently Asked Questions
What happens if there are multiple new shareholders on the same day, is this one change of corporate control or more?
A change of corporate control application fee is for one new controller, therefore whilst we would not expect you to submit multiple application forms, you would need to pay for each new controller. If there were 3 new controllers, you would have to pay the application fee three times.
Do I have to pay for an ancillary remote licence?
No, you do not have to pay any fees for this licence.
What do you mean by a financial institution that is regulated by FCA or registered/head office address in an EEA state and is regulated by its home state regulator?
By this we mean commercial banks, investment banks, brokerage firms, insurance companies, or asset management funds who meet the criteria set out above.
Changes of corporate control within a group
Where changes in control are for two or more licensees that are part of the same group structure, and the licensees will have the same new controller at the same time, further discounts may be applicable.
The licensee with the highest application fee will pay either 25% (if already a licence holder) or 75% (if not) of the standard fee. You will need to work out the highest category across the group for the remote and/or non-remote licence. The other group companies subject to the change of control will pay £100 each.
Reporting other controller changes
If the acquisition is 3% or more of the shares, rights to profits or voting power but less than 10%, this is not a Change of Control. However, you must notify us of these changes through eServices by way of a key event.
If a person already owns over 10% of a company, 10% of the rights to profits of a company or 10% of the voting power of a company, any increase to this shareholding is not deemed as a change of control. However, we would still like to know about these changes so that we can ensure they do not impact on the overall suitability of the licensee.