You have decided it is time to say a fond farewell to your childcare services business, but you may not know how to sell it to a potential buyer. This article sets out some of the key issues to consider when selling a childcare business in New South Wales (NSW), including a practical guide to transferring your service approval.
Service and Provider Approvals
To operate a childcare business in NSW, you would already have:
- a provider approval, which allows you to provide child services generally; and
- a service approval, which is unique to the particular childcare business you operate.
While anyone can apply for a provider approval, only you can transfer your business’ service approval to a new owner.
When selling your childcare business, you should look for a buyer who:
- already holds a provider approval; or
- is very likely to obtain one.
This will mean that the transfer of your service approval will be straightforward and more likely to be granted. If you want to sell your business to someone without an existing provider approval, be aware of the risks of entering into a contract of sale with them. If they are not ultimately granted provider approval, you will have spent considerable time and money on a sale that cannot proceed.
When assessing whether a potential buyer is a good sale candidate, or likely to obtain a provider approval, take the time to do some due diligence.
Have they operated a similar business before? Have they had any issues with maintaining their provider approval? What qualifications do they have?
Asking these sorts of questions will help you know if they are the right buyer for you. It may also indicate how long the sale process could take. For example, settlement will take longer if the prospective buyer does not already have provider approval.
Conditions in the Contract
When selling a childcare services business, the service approval and goodwill of the business are key parts of the sale, along with the lease of the premises. The service approval is particularly important, as it allows the new owner to operate your existing business. Therefore, ensure that your contract of sale includes specific provisions on how the service approval will be transferred.
You and the buyer may also agree to include the following common conditions in the sale contract, to ensure proper notified transfer of the business:
- the buyer has to provide you with a signed notification form as required by the NSW Department of Education and Communities (DEC) or the Australian Children’s Education & Care Quality Authority (ACECQA) and lodge the form with any necessary fee;
- the buyer and you must do all things reasonably necessary to provide the above authorities with any other documentation or information required to ensure the service approval is transferred; or
- the buyer and you must meet any conditions the DEC or ACECQA state must be complied with before they will agree to the transfer.
Transferring the Service Approval
Once the buyer has signed the contract of sale, it is time to transfer your service approval. You can do this by submitting the relevant forms to the DEC, and notifying parents of the sale.
1. Form Submission
The type of form you submit depends on what kind of childcare service you offer. Regardless of the form you need, you must submit it to the DEC at least 42 days before the transfer/settlement date.
Notification of Intention to Transfer Service Approval Form.
The service approval will be transferred to the buyer on the settlement/transfer date. If the DEC has rejected your transfer request, they will notify you within 28 days of the proposed transfer date.
2. Parent Notification
Regardless of the type of childcare services you offer, you must notify the parents of the children that receive services about the sale. This must happen at least two business days before the transfer/settlement date.
You should ideally provide notification two weeks before settlement.
Finalising the Sale
You and the buyer must notify the DEC that the transfer has taken place. Notification should be in writing, within two business days of the transfer/settlement date. You will also need to submit a Notification of Transfer of Service Approval Form to the DEC if you operate a:
- centre-based occasional care;
- budget-funded service;
- mobile service; or
- home-based service.
Keep in mind that, although your business has now been sold, you may still need to comply with the applicable regulations regarding confidentiality and record-keeping for statutory or tax purposes.
When selling your childcare business, you should know how to transfer your service approval, and what obligations you may have under the sale contract.
If you need help with preparing or reviewing a contract of sale, or assistance on what forms you will need to complete, contact LegalVision’s sale of business lawyers today on 1300 544 755, or fill out the form on this page.
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