You have been asked to provide consent to a change of control - what next?
Has a counterparty asked you to consent to a change in the control of their entity?
"Change of control" clauses are common in government contracts, and are frequently seen in leases and service or supply agreements. The purpose of these clauses is to:
- provide a party with certainty as to who they are dealing with (which is particularly important if you have specific requirements on who you can contract with)
- prevent a counterparty from circumventing any contractual restrictions on assignment.
In this article, we provide an overview of our key considerations for reviewing and responding to a change of control request.
What is a change of control clause?
The general concept of a "change of control" clause is that an entity must obtain consent from and/or notify the other party if there is a change in the controlling interest of the entity.
What is considered to be a "change" in control varies between contracts. It will commonly include:
- a change of 50 per cent or more in the direct or indirect ownership of the entity (e.g. the sale of shares in the entity or in the entity's holding company);
- a change which results in a person or other legal entity holding more than 50 per cent of the securities in the entity; or
- a change in the persons who determine the composition of the board of directors.
What steps should you take if you receive a request for consent?
If you receive correspondence in relation to a change of control, you should consider taking the steps below.
1. Review the relevant contract
Review the contract to confirm what the actual consent requirement is and whether you have a timeframe for providing your consent. In particular, you should consider:
- whether you actually need to provide your consent, or if the counterparty is only required to notify you of the change
- if there are any restrictions on your consent (e.g. can consent be withheld in your sole discretion? Or can it not be unreasonably withheld?)
- each party's termination right under the agreement (e.g. can you terminate if you are unhappy with the counterparty's performance after the change? Can the counterparty just terminate the agreement if you don't provide your consent?).
2. Request further information
Consider if you need any additional information before you make an informed decision on whether the incoming owner is suitable for the contract (and if you have this right under the contract). If possible, you should consider requesting:
- information on the new owner, including their identity, ownership and experience in the relevant industry
- financial information of the incoming owner to confirm their solvency and suitability (e.g. a counterparty could be assigning the agreement to a shell company to try and reduce their liability)
- information on whether the change will impact any bank guarantees or other security in place in connection with the contract.
3. Additional considerations
Before providing your consent, you should also consider:
- the reasons behind the change in control (e.g. is it a sale, a third party investment or an internal restructure?)
- whether the change may detrimentally impact the services being provided to you
- if the consent request includes additional terms (such as a waiver of any claims against the old owners).
In summary, the key consideration will be reviewing the relevant contract to confirm your rights and obligations. You should also ensure that you have sufficient comfort on the suitability and solvency of the incoming owner and, if necessary, seek legal advice.
We can help you review any requests and assist you with the above steps. Contact us below or get in touch with us here for more information.
Authors: William Kontaxis & Samuel Lane
In the media
NSW pushes ahead with Great Western Highway upgrade
despite federal funding uncertainty
The NSW Government has decided to proceed with a
multi-billion dollar upgrade of the Great Western Highway despite
uncertainty over whether the Federal Government would honour the
previous Coalition government's commitment and fund this
project (24 Oct 2022). More.
'Certainty' for Hunter Valley horse studs, as
NSW Government rules out open-cut mining at Dartbrook
The NSW Government has banned open-cut mining at the
Dartbrook Coal Mine in order to protect the country's
thoroughbred breeding and racing sectors. This was after some
multi-million-dollar horse studs looked to move interstate (22 Oct
2022). More.
NSW government to seek damages from rail union over plan
to turn off Opal gates
The NSW government will take the rail union to the Federal
Court, seeking damages and any loss of revenue over their planned
industrial action to turn off Opal card readers at train stations.
(18 Oct 2022). More.
Publications
Have your say on the future of NSW
The NSW Government is providing a community consultation
that allows NSW residents to help shape the future of NSW. This was
launched by the Department of Customer Service and its government
partners (24 October 2022). Have your say here.
Climate Change Policy and Action Plan
The NSW Environment Protection Authority is seeking public
feedback on the EPA's draft Climate Change Policy and Climate
Change Action Plan 2022-2025 (21 October 2022). The Department is
taking feedback and submissions until Thursday 3 November 2022,
5pm. Read here.
Single-use plastic guidance for industry (food service
ware items)
This guidance intends to assist suppliers to assess
whether a food service ware item listed under the NSW Plastic
Reduction and Circular Economy Act 2021 (NSW) is likely to be a
'single-use' item and banned (11 October 2022). Read here.
Marine Debris Threat and Risk Assessment Summary
Report
The report summarises the key findings in a study of the
risks posed by marine debris to the marine estate in NSW (24
October 2022). Read here.
Sydney Harbour National Park plan of management draft
amendment
The draft amendment proposes changes to the Sydney Harbour
National Park Plan of Management which would enable the development
of a proposed environmental education centre (21 October 2022).
Read here.
Govetts Leap Lookout: Review of environmental
factors
This document examines the likely environmental impacts
associated with upgrading the visitor precinct and measures needed
to reduce these impacts (13 October 2022). Read here.
First Nations Business Sector Technical Research
Paper
The inaugural First Nations Business Sector Technical
Research Paper provides the first NSW-specific analysis of the size
and nature of the First Nations business sector and sets a baseline
against which sector's growth is able to be measured over time
(25 October 2022). Read here.
Practice and Courts
AAT Bulletin Issue No. 21/2022
The AAT Bulletin is a fortnightly publication containing
information about recently published decisions and appeals against
decisions in the AAT's General, Freedom of Information,
National Disability Insurance Scheme, Security, Small Business
Taxation, Taxation & Commercial and Veterans' Appeals
Divisions (17 October 2022). Read more here.
Decisions Reserved - Supreme Court of NSW Court of
Appeal
The Court of Appeal maintains a list of matters before the
Court for which judgment is reserved (21 October 2022). Read more
here.
Cases
Haigh v Department of Planning
NSW [2022] NSWSC 1434
CIVIL PROCEDURE - Dismissal of proceedings - whether a reasonable
cause of action is disclosed - whether proceedings constitute an
abuse of process - reflective loss - statement of claim dismissed -
leave granted to replead.
Civil Procedure Act 2005 (NSW); Environmental Planning and
Assessment Act 1979; Fair Trading Act 1987; Limitation Act 1969;
Trade Practices Act 1974 (Cth); Uniform Civil Procedure Rules 2005
(NSW).
FMP v Secretary, Department of
Communities and Justice [2022] NSWCATAD
330
INTERLOCUTORY - stay - Children and Young Persons (Care and
Protection) Act 1998 - out of home care - restoration -
cancellation of authorised carers authorisation.
Administrative Decisions Review Act 1997 (NSW); Civil and
Administrative Tribunal Act 2013 (NSW); Community Services
(Complaints, Reviews and Monitoring) Act 1993 (NSW).
North Sydney Council v
EIG [2022] NSWCATAP 331
APPEALS - Privacy - whether leave to appeal is required - whether
the personal information was collected - use of the relevant
personal information - disclosure and s 11 of the Local Government
Act - failure to resolve a factual dispute.
Administrative Decisions Review Act 1997 (NSW); Civil and
Administrative Tribunal Act 2013 (NSW); Civil and Administrative
Tribunal Rules 2014; Privacy and Personal Information Protection
1998 (NSW); Local Government Act 1993 (NSW).
Young v Inner West
Council [2022] NSWLEC 1574
DEVELOPMENT APPLICATION: alterations and additions to retail
premises - conciliation conference - agreement between the parties
- orders.
Environmental Planning and Assessment Act 1979 (NSW); Environmental
Planning and Assessment Regulation 2000; Land and Environment Court
Act 1979 (NSW); Inner West Local Environment Plan 2022;
Marrickville Local Environmental Plan 2011; State Environmental
Planning Policy (Resilience and Hazards) 2021; State Environmental
Planning Policy (Transport & Infrastructure) 2021.
Armada Avalon Pty Ltd v Northern
Beaches Council [2022] NSWLEC
1573
MODIFICATION APPLICATION - application to modify Court Development
Consent - seniors housing - amended plans - conciliation conference
- agreement between the parties - orders.
Environmental Planning and Assessment Act 1979; Land and
Environment Court Act 1979; State Environmental Planning Policy
(Housing for Seniors or People with a Disability) 2004; State
Environmental Planning Policy (Housing) 2021; State Environmental
Planning Policy (Building Sustainability Index: BASIX) 2004.
GPV Adamstown Pty Ltd AFT GPV Adamstown
Trust v Newcastle City Council [2022] NSWLEC
1572
DEVELOPMENT APPLICATION: health services facility in R4 High
Density Residential zone - Adamstown Renewal Corridor - whether
provision of parking is sufficient - whether setbacks are
acceptable.
Environmental Planning and Assessment Act 1979 (NSW); Land and
Environment Court Act 1979 (NSW); Newcastle Local Environmental
Plan 2012; State Environmental Planning Policy (Planning Systems)
2021; State Environmental Planning Policy (Transport and
Infrastructure) 2021; State Environmental Planning Policy
(Resilience and Hazards) 2021.
Thirroul Plaza Pty Ltd v Wollongong
City Council [2022] NSWLEC
1569
DEVELOPMENT APPLICATION: demolition and construction of a proposed
three storey mixed use development with basement car park -
supermarket, shops, 77 residential apartments - whether the
development has an adverse impact on built form and character of
the village - acceptability of pedestrian circulation and public
domain - whether the development will result in unacceptable
impacts on the adjacent heritage items - whether the residential
component of the development will have appropriate amenity -
whether the development will have an appropriate level of acoustic
amenity given proximity to rail and commercial uses - consideration
of public submissions and concerns - appeal dismissed, application
refused.
Civil Procedure Act 2005 (NSW); Environment Planning and Assessment
Act 1979 (NSW); Environmental Planning and Assessment Regulation
2000; Land and Environment Court Act 1979 (NSW); State
Environmental Planning Policy (Transport and Infrastructure) 2021;
State Environmental Planning Policy No 65 - Design Quality of
Residential Apartment Development; State Environmental Planning
Policy Resilience and Hazards; Wollongong Local Environmental Plan
2009.
SSTG Property Pty Ltd v Inner West
Council [2022] NSWLEC 1557
DEVELOPMENT APPLICATION - demolition of on-site structures -
construction of multi dwelling housing - in-fill affordable housing
- no contentions pressed by the Respondent - objecting lay
submissions - significant excavation in proximity to boundaries -
existing building prevents the undertaking of further subsurface
investigations to define construction particulars - partial consent
to allow demolition which in turn allows subsurface investigations
- subsequent deferred commencement consent in regard to remainder
of the development application.
Civil Procedure Act 2005 (NSW); Conveyancing Act 1919 (NSW);
Environmental Planning and Assessment Act 1979 (NSW); Environmental
Planning and Assessment Regulation 2000; Inner West Local
Environmental Plan 2022; Leichhardt Local Environmental Plan 2013;
State Environmental Planning Policy (Affordable Rental Housing)
2009; State Environmental Planning Policy (Housing) 2021; State
Environmental Planning Policy (Resilience and Hazards) 2021.
Lahoud v Willoughby City
Council [2022] NSWLEC 125
JOINDER - Notice of Motion to join Willoughby Local Planning Panel
(the Panel) as Third Respondent to Class 4 judicial review
proceedings - r 59.3 (4) of the Uniform Civil Procedure Rules 2005
(the UCPR) mandates joinder of body "responsible for the
decision" being reviewed - decision made by the Panel - notice
of determination granting development consent issued by Willoughby
City Council (the Council) as a consequence of the decision of the
Panel - question of whether the Panel or the Council is
"responsible for the decision" for the purposes of r
59.3(4) - applicant in Class 4 proceedings seeks joinder of the
Panel in order to seek leave to issue.
interrogatories - the Council opposes joinder - holder of the
challenged development consent takes no part in joinder hearing -
held the Panel not "responsible for the decision" in the
sense required by r 59.3(4) of the UCPR - joinder, in the
alternative, also sought pursuant to r 6.24(1) of the UCPR -
consideration of whether joinder necessary for issues in dispute -
consideration of whether joinder necessary to bind the Panel to the
outcome of the proceedings - neither basis for joinder established
- joinder of the Panel rejected.
COSTS - costs of the application for joinder follow the event - the
Applicant ordered to pay the Council's costs of the joinder
motion as agreed or assessed.
Environmental Planning and Assessment Act 1979 (NSW); Environmental
Planning and Assessment and Electoral Legislation Amendment
(Planning Panels and Enforcement) Bill 2017; Uniform Civil
Procedure Rules 2015.
Boulus Constructions Pty Ltd v
Warrumbungle Shire Council [2022] NSWSC
1368
BUILDING AND CONSTRUCTION - where no valid development consent or
construction certificate in relation to building works - whether
defence of illegality available in relation to claim for breach of
statutory duty under s 37 of the Design and Building Practitioners
Act 2020 (NSW) - whether managing director and project site
supervisor of builder capable of being persons for the purposes of
s 37 of that Act.
PRACTICE AND PROCEDURE - whether cross-claimant should have leave
to amend Cross-Claim List Statement - where cross-claimant seeks to
introduce claim for breach of statutory duty under s 37 of the
Design and Building Practitioners Act 2020 (NSW) - whether leave
should be refused because of availability of defence of illegality
- whether amendment should be disallowed against proposed
individual cross-defendants because they are not persons for the
purposes of s 37 of that Act - whether amendment should be
disallowed on the basis of prejudice to the proposed
cross-defendants.
Civil Liability Act 2002 (NSW); Corporations Act 2001 (Cth); Design
and Building Practitioners Act 2020 (NSW); Environmental Planning
and Assessment Act 1979 (NSW); Interpretation Act 1987 (NSW).
NSW Legislation
Proclamations commencing Acts
Mining and Petroleum Legislation Amendment Act 2022
No 21 - published LW 21 October 2022
Regulations and other miscellaneous instruments
Environmental Planning and Assessment Amendment
(Water Catchments) Regulation 2022 - published LW 21 October
2022
Mining Amendment (Royalties for Rejuvenation Fund)
Regulation 2022 - published LW 21 October 2022
University of New South Wales Amendment By-law
2022 - published LW 19 October 2022
Cemeteries and Crematoria Amendment Regulation
2022 (2022-605) - published LW 14 October 2022
Drug Court Amendment (Court Expansion) Regulation
2022 (2022-606) - published LW 14 October 2022
Electricity Supply (General) Amendment (Energy
Security Safeguard Schemes) Regulation 2022 (2022-607) -
published LW 14 October 2022
Environmental Planning and Assessment Amendment
(Dungowan Dam Project) Order 2022 (2022-616) - published LW 14
October 2022
Environmental Planning and Assessment Amendment
(Warragamba Dam) Order 2022 (2022-617) - published LW 14
October 2022
Motor Accident Guidelines: CTP Care (version
1.0) (2022-608) - published LW 14 October 2022
Order regarding volunteers taking part in emergency
operations (2022-618) - published LW 14 October 2022 at
5:00pm
Road Transport (Vehicle Registration) Amendment
(Offensive Advertising) Regulation 2022 (2022-609) - published
LW 14 October 2022
Teacher Accreditation Amendment Regulation 2022
(2022-610) - published LW 14 October 2022
Work Health and Safety Amendment (Penalty Notices)
Regulation 2022 (2022-611) - published LW 14 October 2022
Environmental Planning Instruments
Cessnock Local Environmental Plan 2011 (Amendment
No 35) - published LW 21 October 2022
Gunnedah Local Environmental Plan 2012 (Amendment
No 15) - published LW 21 October 2022
Parkes Local Environmental Plan 2012 (Amendment No
6) - published LW 21 October 2022
Shoalhaven Local Environmental Plan 2014 (Amendment
No 46) - published LW 21 October 2022
Shoalhaven Local Environmental Plan 2014 (Amendment
No 47) - published LW 21 October 2022
Standard Instrument (Local Environmental Plans)
Amendment (Canal Estate Development and Public Bushland) Order
2022 - published LW 21 October 2022
State Environmental Planning Policy Amendment
(Water Catchments) 2022 - published LW 21 October 2022
Sydney Local Environmental Plan (Green Square Town
Centre) 2013 (Amendment No 4) - published LW 21 October
2022
Waverley Local Environmental Plan 2012 (Amendment
No 23) - published LW 21 October 2022
Wentworth Local Environmental Plan 2011 (Map
Amendment No 2) - published LW 21 October 2022
Wingecarribee Local Environmental Plan 2010
(Amendment No 66) - published LW 21 October 2022
Wingecarribee Local Environmental Plan 2010 (Map
Amendment No 5) - published LW 21 October 2022
Parramatta Local Environmental Plan 2011 (Map
Amendment No 4) - published LW 14 October 2022
Port Stephens Local Environmental Plan 2013
(Amendment No 41) - published LW 14 October 2022
Shoalhaven Local Environmental Plan 2014 (Map
Amendment No 5) - published LW 14 October 2022
Woollahra Local Environmental Plan 2014 (Amendment
No 27) - published LW 14 October 2022
Bills introduced
Government
Crimes Amendment (Protection of Criminal Defence
Lawyers) Bill 2022 19 October 2022
District Court Amendment Bill 2022 19 October
2022
Fisheries Management Amendment (Enforcement
Powers) Bill 2022 19 October 2022
Government Sector Employment Amendment Bill
2022 19 October 2022
Medicines, Poisons and Therapeutic Goods Bill
2022 19 October 2022
Motor Accident Injuries Amendment Bill 2022 19
October 2022
Personal Injury Commission Amendment Bill 2022
19 October 2022
Registered Clubs Amendment Bill 2022 19
October 2022
Building and Other Fair Trading Legislation
Amendment Bill 2022 12 October 2022
Children and Young Persons (Care and Protection)
Amendment (Family is Culture) Bill 2022 13 October 2022
Confiscation of Proceeds of Crime Legislation
Amendment Bill 2022 12 October 2022
Constitution Amendment (Appointment of
Lieutenant-Governor and Administrator) Bill 2022 12 October
2022
Crimes Legislation Amendment (Coercive Control)
Bill 2022 12 October 2022
Electoral Legislation Amendment Bill (No 2)
2022 12 October 2022
Electronic Conveyancing Enforcement Bill 2022
12 October 2022
Property Tax (First Home Buyer Choice) Bill
2022 12 October 2022
Statute Law (Miscellaneous Provisions) Bill (No 2)
2022 12 October 2022
Treasury and Energy Legislation Amendment Bill
2022 12 October 2022
Non-Government
ICAC and Other Independent Commissions Legislation
Amendment (Independent Funding) Bill 2022 20 October 2022
Local Land Services Amendment (Private Native
Forestry) Bill 2022 19 October 2022
Water Management Amendment (Water Access Licence
Register) Bill 2022 20 October 2022
Weapons Prohibition Amendment (Silencers) Bill
2022 19 October 2022
Port of Newcastle (Extinguishment of Liability)
Bill 2022 13 October 2022
Residential Tenancies Amendment (Prohibiting No
Grounds Evictions) Bill 2022 13 October 2022
Bills revised following amendment in Committee
Childcare and Economic Opportunity Fund Bill
2022 13 October 2022
Children and Young Persons (Care and Protection)
Amendment (Family is Culture) Bill 2022 20 October 2022
Crimes Legislation Amendment (Coercive Control)
Bill 2022 19 October 2022
Electoral Legislation Amendment Bill 2022 18
October 2022
Childcare and Economic Opportunity Fund Bill
2022 13 October 2022
Bills passed by both Houses of Parliament
Childcare and Economic Opportunity Fund Bill
2022 18 October 2022
Confiscation of Proceeds of Crime Legislation
Amendment Bill 2022 20 October 2022
Constitution Amendment (Appointment of
Lieutenant-Governor and Administrator) Bill 2022 20 October
2022
Electoral Legislation Amendment Bill (No 2)
2022 20 October 2022
Electoral Legislation Amendment Bill
2022
Statute Law (Miscellaneous Provisions) Bill (No 2)
2022 20 October 2022
Crimes (Administration of Sentences) Amendment (No
Body, No Parole) Bill 2022 13 October 2022
Crimes Amendment (Money Laundering) Bill 2022
13 October 2022
Criminal Procedure Legislation Amendment
(Prosecution of Indictable Offences) Bill 2022 13 October
2022
Dedicated Encrypted Criminal Communication Device
Prohibition Orders Bill 2022 13 October 2022
Law Enforcement (Powers and Responsibilities)
Amendment (Digital Evidence Access Orders) Bill 2022 13 October
2022
Royal Botanic Gardens and Domain Trust Amendment
(Facilitation of Sydney Metro West) Bill 2022 13 October
2022
Security Industry Amendment Bill 2022 13
October 2022
Bills assented to
Crimes (Administration of Sentences) Amendment (No
Body, No Parole) Act 2022 No 43 - Assented to 18 October
2022
Crimes (Sentencing Procedure) Amendment Act 2022 No
44 - Assented to 18 October 2022
Crimes Amendment (Money Laundering) Act 2022 No
45 - Assented to 18 October 2022
Dedicated Encrypted Criminal Communication Device
Prohibition Orders Act 2022 No 46 - Assented to 18 October
2022
Law Enforcement (Powers and Responsibilities)
Amendment (Digital Evidence Access Orders) Act 2022 No 47 -
Assented to 18 October 2022
Crimes Legislation Amendment (Assaults on Frontline
Emergency and Health Workers) Act 2022 No 48 -Assented to 18
October 2022
Criminal Procedure Legislation Amendment
(Prosecution of Indictable Offences) Act 2022 No 49 - Assented
to 18 October 2022
Royal Botanic Gardens and Domain Trust Amendment
(Facilitation of Sydney Metro West) Act 2022 No 50 - Assented
to 18 October 2022
Scrap Metal Industry Amendment (Review) Act 2022 No
51 - Assented to 18 October 2022
Security Industry Amendment Act 2022 No 52 -
Assented to 18 October 2022
Workers' Compensation (Dust Diseases) Amendment
Act 2022 No 53 - Assented to 18 October 2022
Cth Legislation
Act compilation
Military Rehabilitation and Compensation Act
2004 24/10/2022 - Act No. 51 of 2004 as amended
Veterans Entitlements Act 1986 - 24/10/2022-
Act No. 27 of 1986 as amended
National Emergency Declaration Act 2020 -
24/10/2022- Act No. 128 of 2020 as amended
Social Security Act 1991 - 24/10/2022- Act No.
46 of 1991 as amended
Income Tax Assessment Act 1997 22/10/2022- Act
No. 38 of 1997 as amended
Corporations Act 2001 20/10/2022 - Act No. 50
of 2001 as amende
Income Tax Assessment Act 1936 20/10/2022 - Act
No. 27 of 1926 as amended
Social Security (Administration) Act 1999
20/10/2022 - Act No. 191 of 1999 as amended
Social Security Act 1991 19/10/2022 - Act No.
46 of 1991 as amended
Veterans' Entitlements Act 1986 17/10/2022
- Act No. 27 of 1986 as amended
Income Tax Assessment Act 1997 15/10/2022 - Act
No. 38 of 1997 as amended
Social Security (Administration) Amendment
(Continuation of Cashless Welfare) Act 2020 15/10/2022 - Act
No. 136 of 2020 as amended
Fringe Benefits Tax Assessment Act 1986
15/10/2022 - Act No. 39 of 1986 as amended
National Health Act 1953 14/10/2022 - Act No.
95 of 1953 as amended
A New Tax System (Family Assistance)
(Administration) Act 1999 14/10/2022 - Act No. 81 of 1999 as
amended
Safety, Rehabilitation and Compensation
(Defence-related Claims) Act 1988 13/10/2022 - Act No. 156 of
1988 as amended
Prohibition of Human Cloning for Reproduction Act
2002 12/10/2022 - Act No. 144 of 2002 as amended
Intelligence Services Act 2001 12/10/2022 - Act
No. 152 of 2001 as amended
Freedom of Information Act 1982 12/10/2022 -
Act No. 3 of 1982 as amended
Military Rehabilitation and Compensation Act
2004 12/10/2022 - Act No. 51 of 2004 as amended
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.