Policy Guidance on Transfers of Ownership of Licensed Private Career Schools

Number: 
46-0102
Date Issued: 
01/02/2018
Updated: 
01/30/2018

This guideline sets forth requirements that apply when licensed private career schools transfer or assign their equity or assets from one owner to another. This guideline does not apply to ESL schools. ESL schools seeking to transfer or assign their equity or assets in whole or in part must comply with 8 NYCRR § 126.10(j)(2)(iii) of the Commissioner’s regulations. For additional information, visit ESL School Ownership Change Fact Sheet.

Preliminarily, to transfer or assign ownership of a licensed private career school, in whole or in part, the school must not be closed. As noted in BPSS Policy Guideline 42-1117 (Policy Guidance on Voluntary School Closures), the act of closing a school severs the relationship between the school and the New York State Education Department, rendering the closed entity no longer a school subject to New York’s Education Law (except with respect to completing the closure process). Schools may determine that transferring or assigning ownership interests while they are still licensed is preferable to executing the same transfers or assignments they are not still licensed.

Because transferring or assigning a school’s ownership results in its ability to continue to operate as a school, the transfer or assignment must occur with both parties acknowledging that the school is and will continue to operate. Under New York’s Education Law § 5001:

No license granted under this section shall be transferable or assignable without the approval of the commissioner. Upon transfer or assignment of any interest totaling twenty-five percent or more, whether direct or indirect, in the total equity or assets of a school, such school shall be deemed a new school required to submit a new school application and obtain a new license pursuant to this article. Provided, however, that upon such a substantial change in interest, the previous school license shall remain in effect until the new license is issued or denied or the previous license expires or is revoked, whichever occurs first.

In the case of a transfer or assignment, a school may continue to operate under its existing license until a new license is issued or denied, or until its existing license expires. Depending on the percentage of ownership being transferred or assigned (see below), the new owner (and prospective license holder(s)) may be required to submit a new school license application to the BPSS Licensing Unit. If the transfer or assignment involves 25% or more of the school’s equity or assets, then the new license application will start the process of “carrying over” the school’s old license to its operation under a new license. This licensing process is subject to the same fees and deadlines as those for the processing of new licenses not involving transfers or assignments.

Education Law § 5001(7) distinguishes between transferring or assigning the equity or assets of a school, and transferring a school’s license. The first the school may do as a business, the second is a process that is under the authority of the New York State Education Department, as the state agency in charge of issuing private career school licenses and ensuring their integrity. The two events, however, are interconnected. The transfer or assignment of a school’s equity or assets triggers the transfer of a school’s license from one owner to another (or to one ownership composition to another), which becomes the new school licensee if the procedures described in this guideline have been followed.

For licensed private career schools, different procedures are required to be followed depending on the percentage of interests that are being transferred or assigned.

  1. Transfer of Ownership of 24% or Less of the School’s Equity or Assets
     
  2. (a) Transfer of Ownership of 25% or More of the School’s Equity or Assets, Which Do Not Require a New Online Account

    (b) Transfer of Ownership of 100% of the School’s Equity or Assets Which Require a New Online Account

Whichever of these procedures apply, they must be carried out contemporaneously with the transfer or assignment (“upon transfer or assignment”, as Education Law § 5001(7) requires). Therefore, if schools do not timely comply with these procedures, it may result their operating without valid licenses. The determination of whether these procedures have been timely carried out will be subject to the reasonable discretion of the New York State Education Department. Schools, however, are admonished to comply with these procedures as chronologically close in time as possible to, though not necessarily before, any transfer or assignment of their equity or assets. Again, BPSS does not approve or deny the transfer or assignment of the equity or assets of licensed private career schools. It approves or denies transfers of school licenses when transfers or assignments of schools’ equity or assets take place.

(1) Transfer of Ownership of 24% or Less of the School’s Equity or Assets

The requirement of filing a new school application upon the transfer or assignment of the equity or assets of a school in the amount of 25% or more does not apply to the transfer or assignment of the equity or assets of a school in the amount of less than 25%. However, such “24% or less” transfers or assignments are still considered transfers of school licenses pursuant to Education Law § 5001(7) and 8 NYCRR § 126.10(c) of the Commissioner’s regulations. Therefore, these license transfers also require the Commissioner’s approval. Accordingly, if your school is seeking to transfer or assign 24% or less of its equity or assets, your school must, contemporaneously with the transfer or assignment, submit the following:

Required Documentation:

  • Notification of Transfer of Ownership (BPSS -1T)
  • Updated stock Certificates
  • Updated Secretary’s Certificate
  • Purchase Contract and/or Certificate of Stock sale*
  • Other documents that BPSS may reasonably require determining whether to approve the transfer of the school’s license.

(2a) Transfer of Ownership of 25% or More of the School’s Equity or Assets Which Do Not Require a New Online Account

As stated above, if your school seeks to transfer or assign 25% or more of its equity or assets, by sale or otherwise, it must contemporaneously file a new school license application and pay a new license application fee.

Required Documentation:

  • Notification of Transfer of Ownership Form (BPSS -1T)
  • New School Application for Transfers and Fee (the current version of this document can be obtained by email BPSSNewSchools@nysed.gov).
  • Updated Stock Certificates
  • Updated Secretary’s Certificate
  • Purchase Contract and/or Certificate of Stock Sale*
  • A statement signed by all transferees who will succeed, after the transfer takes place, to a 10% interest or more in the school’s equity or assets acknowledging that the transferee will settle any liabilities to students with respect to past and present refunds due or incurred, to the extent of the transferee’s acquired share, because of a student complaint submitted within the statute of limitations
  • Financial Documents Demonstrating Financial Viability**
  • Other documents that BPSS may reasonably require to determine whether to approve the transfer or assignment of the school’s license

(2b) Transfer of Ownership of 100% of the School’s Equity or Assets Which Require a New Online Account

Required Documentation:

  • Notification of Transfer of Ownership Form (BPSS -1T)
  • New School Application for Transfers and Application Fee (Online Application).
  • Updated ownership documentation, including, but not limited to:
    • Updated Stock Certificates
    • Updated Secretary’s Certificate
  • Purchase Contract and/or Certificate of Stock Sale*
  • Documentation of the new owner’s purchase of or permission to use the following items:
    • Curriculum/Program Applications
    • Equipment
    • Administrative Forms & Enrollment Agreements
  • Financial Documents Demonstrating Financial Viability**
  • Documentation demonstrating that the new owner has agreed to take responsibility for existing student records or an agreement with BPSS in accordance with Policy Guideline 40-1115.
  • Documentation of currently enrolled students, and showing that the new owner has agreed to fulfill the terms and conditions of any existing enrollment agreements
  • Documentation demonstrating the new owner’s agreement to pay any refunds that may be due
  • Submission of administrative forms and enrollment agreements for the new school
  • New agent, director, and curriculum applications
  • A statement signed by all transferees who will succeed, after the transfer takes place, to a 10% interest or more in the school’s equity or assets acknowledging that the transferee will settle any liabilities to students with respect to present and past refunds due or incurred, to the extent of the transferee’s acquired share, due to a student complaint submitted within the statute of limitations
  • Letter fixing the new owners’ election regarding the payment of assessments 
    • The new owner, if unable to submit the school’s yearly financial statements, may start operating as a new school with school’s yearly financial reporting and assessment fees. If so, then:

      1. The new owner shall have until April 15 of the year following the approval of the new license to submit its required educational reports; an
      2. The new owner shall have until July 1 of the year following the approval of the new licenses to file its required financial documentation.
       

    • Schools choosing to continue with their current financial reporting requirements, will not be subject to paying any additional assessments under New York’s Education Law § 5007(10)(d) beyond that of the previous ownership. However, this requirement also requires the new owner to continue to submit the school’s yearly financial statements and statistics without interruption.
       
  • ​Other documents that BPSS may reasonably require to determine whether to approve the transfer of the school’s license

*The original, executed sales or transfer agreement (an exact duplicate will suffice) that outlines the terms and conditions under which the equity or assets will be acquired. The agreement must contain the original signatures of all parties involved in the transfer.

**A photocopy of the financial statement covering the school's most recent fiscal year as required by § 5001(4)(e) of the Education Law, and evidence regarding adequacy of resources detailed in 8 NYCRR § 126.8 of the Commissioner’s Regulations. If the transfer or assignment occurs within an existing corporation, only the most recent financial statement is required.

If the school has already submitted such information in their yearly financial reporting, then the school should inform BPSS upon submission of its transfer application. BPSS will then determine if the previous submission is sufficient. A school may not make this determination itself.

A school’s failure to comply with the provisions of the Education Law and Commissioner’s regulations governing transfers or assignments of a licensed private career school’s equity or assets may result in the school being subject to disciplinary action.

Questions about these processes may be sent to BPSS@nysed.gov