If you are planning to sell a registered training organisation (RTO), you have an opportunity to pass on a well-established business to a like-minded business operator equally dedicated to helping students gain successful industry accreditation. As RTOs operate within a highly-regulated framework of quality management,  you must comply with certain obligations to the Australian Skills Quality Authority (ASQA) when you sell your RTO. ASQA is the primary regulatory body responsible for overseeing RTOs in the Australian Capital Territory, New South Wales, the Northern Territory, South Australia, Queensland and Tasmania.

This article will outline the two key ways to sell your business, depending on whether the purchaser:

Can I Sell My RTO Registration? 

In a standard business sale, you can include as much or as little of your business as you are prepared to pass on to the purchaser. 

For example, a restaurant owner would usually be able to choose which parts of the business they wished to sell, such as the:

  • business name;
  • business assets; and
  • current food license.

However, when selling an RTO,  there are certain ASQA guidelines. These guidelines restrict your ability to sell or transfer the accreditation a purchaser will need to operate the business. 

You cannot transfer RTO registration, as it is specific to the person or company that applied for the registration. Therefore, you cannot sell your RTO registration and transfer it to the purchaser’s name when they purchase the business. 

Has the Purchaser Operated an RTO Before? 

As the seller, checking whether the are RTO registered individually or under a corporate entity is important.  If they are RTO registered individually, the purchaser will be able to purchase your business’  assets and continue to operate the business once they have gained ASQA approval. If the purchaser wishes to offer any additional accredited qualifications once they take over your business, they will need ASQA approval.

As the seller, you have the flexibility to decide whether you want the sale to involve selling the:

  • shares in your trading company; or
  • business assets and goodwill.

Both options will carry different tax implications. It is a good idea to seek financial or legal advice before deciding how you will sell your business.

Is the Purchaser Looking to Buy Their First RTO?

If you are planning to accept an offer from someone who has never operated an RTO before, they will need to apply to ASQA for RTO registration.  It is helpful if both you and the purchaser are aware of this requirement from the outset.  

As the seller, you should allow the purchaser to purchase the shares in your trading company. This is so that they have the benefit of RTO registration and can legally operate the business they are buying. This avoids the delay and uncertainty involved with a purchaser lodging a new application for RTO registration. However, the purchaser will still need to demonstrate they can comply with all regulatory requirements through other business audit processes.

What Documents Do I Need to Sell My Shares?

If you are selling the shares in your RTO company, you will need to provide the purchaser with a share sale agreement which sets out:

  • the number of shares being sold;
  • the purchase price of the shares;
  • payment arrangements; and
  • seller warranties. 

It is best to prevent the purchaser from drafting the share sale agreement. This ensures that the document is prepared with your best interests in mind. It also helps to avoid inaccurate or wide-reaching seller warranties.

What Are the ASQA Notification Requirements?

As the current operator of the RTO, you are required to notify ASQA of any changes which affect the operation of the RTO.  You must notify ASQA of the sale and provide the purchaser’s details as soon as practicable and within 90 calendar days of the expected  purchase. Effective from October 2019, there are also additional requirements regarding change of ownership notification obligations. You should ensure that you are up to date with all ASQA requirements for the sale of your RTO. 

Key Takeaways

When selling your RTO, you must comply with your ASQA obligations. It is also important to understand the most efficient way to sell your RTO and ensure a smooth transition in the business handover. In the case where the purchaser has RTO registration, this can simplify the sale process. If the purchaser does not have RTO registration, you will need to consider whether the registration process will affect your ideal sale time frames. If you have questions about selling your RTO or drafting a share sale agreement, contact LegalVision’s business sale lawyers on 1300 544 755 or fill out the form on this page.R

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
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