Ariz. Admin. Code § 4-39-110

Current through Register Vol. 30, No. 50, December 13, 2024

Section R4-39-110 - Change of Ownership or Control

A. In this Section, "change of ownership or control" means is indicated by the following:

1. For a privately held corporation whose control is vested in those who control the voting stock of the corporation:

a. At least 50 percent or more of the voting stock changes from one owner to another within a five-year period; or

b. At least 50 percent of the assets of the corporation are sold regardless of whether the sale is called an asset or securities purchase, a stock or share exchange, or something else;

2. For a publicly traded corporation whose control is vested in the voting members of the board of directors:

a. At least 50 percent of the voting members of the board of directors change within a 12-month period, or

b. At least 50 percent of the assets of the publicly traded corporation are sold regardless of whether the sale is called an asset or securities purchase, a stock or share exchange, or something else;

3. For a non-profit corporation whose control is vested in the voting members of the board of trustees:

a. At least 50 percent of the voting members of the board of trustees change within a 12-month period, or

b. The chief executive officer of the non-profit corporation changes;

4. For a limited partnership whose control is vested in a corporate general partner, the corporate general partner:

a. Has a change of ownership or control as determined under subsections (A)(1) through (A)(3); or

b. At least 50 percent of the assets of the corporate general partner are sold regardless of whether the sale is called an asset or securities purchase, a stock or share exchange, or something else;

5. For a limited liability company whose control is vested in members who control a majority of the interest in the company:

a. At least 50 percent interest changes within a 12- month period; or

b. At least 50 percent of the assets of the limited liability company are sold regardless of whether the sale is called an asset or securities purchase, a stock or share exchange, or something else;

6. For a sole proprietor or a limited partnership that is not described in subsection (A)(4), if at least 50 percent interest changes within a five-year period; and

7. For any business entity described in subsections (A)(1) through (A)(6), when the entity changes from one business form to another including when a non-profit entity becomes a for-profit entity or when a privately held corporation becomes a publicly traded corporation.

B. If assets are sold under subsection (A)(1), (A)(2), (A)(4), or (A)(5), regardless of whether the sale is called an asset or securities purchase, a stock or share exchange, or something else, the sale must transfer liabilities for students enrolled at the time of closing.

C. For the purposes of this Section, assets and liabilities are determined according to generally accepted accounting principles.

D. A change of ownership or control does not occur under subsection (A) if an interest is transferred by operation of law or inheritance to a parent, grandparent, spouse, or child.

E. A licensee shall, within seven days, notify the Board in writing and explain the following:

1. A change of ownership or control as described under subsection (A); or

2. A change of interest or of the voting members of the board of directors of more than 20 percent but less than 50 percent.

F. No later than 60 days after the date on the notice provided under subsection (E), a licensed private accredited institution shall submit to the Board a license application packet that includes:

1. The filing fee required under R4-39-201(E);

2. Either:

a. Information and documentation specified in R4-39-103(D)(3) through (D)(10), as applicable, R4-39-104(D)(2), if required, and (D)(3) through (D)(6), (D)(8)(a) and (c) through (D)(12), (D)(14), and (D)(17); or

b. If required by an accrediting agency that accredits the licensee's programs or the institution through which the programs are offered, a copy of change of ownership documents submitted by the licensee to the accrediting agency;

3. Attestation that the applicant will assume financial responsibility, as required under R4-39-404(C), for all student tuition refunds for which the institution has an obligation; and

4. Other information determined by the Board to be relevant to determining the applicant's compliance with licensing requirements under A.R.S. Title 32, Chapter 30 and this Article.

G. No later than 60 days after the date on the notice provided under subsection (E), a licensed private non-accredited institution shall submit to the Board a license application packet that includes:

1. The filing fee required under R4-39-201(E);

2. For a private non-accredited vocational institution, information and documentation specified in R4-39-104(D)(3) through (D)(6), (D)(8)(a) and (c), (D)(12) through (D)(14) and (D)(17);

3. For a private non-accredited degree-granting institution, information and documentation specified in R4-39-103(D)(3) through (D)(10), as applicable, R4-39-104(D)(2) through (D)(6), (D)(8)(a) and (c), (D)(12) through (D)(14) and (D)(17);

4. Attestation that the applicant will assume financial responsibility, as required under R4-39-404(C), for all student tuition refunds for which the institution has a financial obligation; and

5. Other information determined by the Board to be relevant to determining the applicant's compliance with licensing requirements under this Article.

H. Except as specified in subsection (H)(6), the Board shall not grant a license as a result of a change of ownership or control to an applicant if:

1. Within 10 years before filing the application packet required in subsection (G) or (H) or since the start date of the current licensure period, an individual with at least 20 percent ownership in the applicant or an officer or employee who controls, manages, or represents the applicant in this state has been convicted in this state or any jurisdiction of any crime, regardless of whether the crime is a misdemeanor or felony, that a reasonable person would consider relevant to the legal and ethical operation of an educational institution;

2. Within 10 years before filing the application packet required in subsection (G) or (H) or since the start date of the current licensure period, a person with at least 20 percent ownership in the applicant or an officer or employee who controls, manages, or represents the applicant in this state has had a license to operate a vocational degree-granting institution revoked in this state or any jurisdiction;

3. The applicant provides false or misleading information on or with the application required by this Section;

4. The applicant was previously licensed by the Board and ceased operation without complying with R4-39-402 and R4-39-406; or

5. The applicant ceased to operate or offer a program and as a result:

a. The Board was obligated to make a payment from the Student Tuition Recovery Fund established under A.R.S. § 32-3072, or

b. The DE or a private entity forgave loans, in whole or in part, to affected students; and

6. If the conviction described in subsection (H)(1) was discharged, expunged, set aside, or vacated, the Board shall consider this fact when exercising its discretionary power under this Section.

I. The Board shall grant a license as a result of a change of ownership or control, if the applicant:

1. Demonstrates compliance with A.R.S. §§ 32-3021 through 32-3027, as applicable; and

2. Meets the application requirements in subsection (F) or (G).

J. The Board may conduct an inspection, under A.R.S. § 41-1009, of an applicant's or licensee's place of business to determine compliance with the requirements of A.R.S. Title 32, Chapter 30 and this Article.

Ariz. Admin. Code § R4-39-110

Adopted effective May 21, 1985 (Supp. 85-3). Amended effective February 23, 1993 (Supp. 93-1). R4-39-110 renumbered to R4-39-109; new Section R4-39-110 renumbered from R4-39-111 and amended (Supp. 98-4). Amended by final rulemaking at 11 A.A.R. 2262, effective August 6, 2005 (Supp. 05-2). Amended by final rulemaking at 22 A.A.R. 921, effective 6/4/2016.