Can you buy an AFSL?

We’re regularly asked whether a client can buy an AFSL instead of applying for a new AFSL.

While it is possible to buy a company which holds an AFSL – whether you should and the associated implications are more complex which need to be explained.

Can you buy an AFSL?

An AFSL is not a separate asset and cannot be transferred to another company or person.

Buying an entity that holds an AFSL

While you can’t buy an AFSL, you can purchase the entity that holds the AFSL. Like with any purchase of a business, there are risks associated in acquiring a business and appropriate due diligence should be undertaken.

Issues when purchasing an entity with an AFSL

In addition to the ordinary legal and commercial issues associated with purchasing a business, there are specific AFSL issues that clients should consider when negotiating the purchase terms. These include:

• AFSL authorisations. Does the entity hold the AFSL authorisations the client requires to operate its intended business?
• AFSL conditions. Does the AFSL have conditions that may affect the purchase structure or negotiations? For example – is a key person condition imposed on the existing responsible managers of the entity?
• Who are the responsible managers post purchase? The AFSL entity must have responsible managers with appropriate skills and experience in all of the financial services it is authorised to provide. If the AFSL includes a key person condition – it may be necessary to negotiate for the existing responsible managers to remain with the entity post settlement for a period of time.

Post purchase obligations 

Post settlement, the AFSL entity will need to notify ASIC of the following changes:

• Changes to the responsible managers.
• Changes to the trading names, addresses, contact details and auditor of the entity.
• If the entity is a company, notification of a change in control.
• If the AFSL is subject to a key person condition and there is a change in the responsible managers, an AFSL variation will be required which proposes new responsible managers in lieu of those who will no longer act for the entity.

Does ASIC review the transaction?

Responsible manager appointments need to be notified to ASIC. ASIC will review the responsible manager mix to determine whether the AFSL entity continues to have the organisational competence to undertake the financial services authorised on the licence.

Where the AFSL contains a key person condition and responsible managers subject to the condition will no longer act, ASIC will review the AFSL variation and alternative responsible managers submitted to determine whether the AFSL entity has the appropriate organisational competence to appropriately carry out its activities.

ASIC will assess any change of control to determine whether those associated with the AFSL entity, including the new parent entity are fit and proper.