STRUCTURING YOUR RTO FOR SALE

STRUCTURING YOUR RTO FOR SALE

Too often owners approach us to assist in selling RTO only to find thatthe business is not saleable. Not only because it’s not profitable or hasno students. But because its registration, – the very asset that a buyermust have in order to continue the business, cannot be used by a newowner.Let me explain…The education and training sector in Australia is highly regulated. TheAustralian Skills Quality Authority (ASQA) which is charged with theresponsibility of enforcing the regulations will not permit the transfer ofa registration.

Only the person or entity to whom the registration was originallygranted can use it. It follows therefore that if the grantee is anindividual or partnership, no-one other than them can use it…becauseit cannot be transferred. Therefore if the business is structured as asole trader or partnership, the business cannot be sold. In most cases,the registration is in the name of a company and for a sale to occur, itis generally necessary to sell the shares in the company.All too often, the company is a corporate trustee for a trust and thiscan cause complications on sale as well. This structure is usuallyrecommended by accountants for tax purposes when setting up thebusiness but a lack of understanding of the regulatory requirementscan lead to this having a detrimental effect when selling. It is mostoften necessary to separate the company from the trust before goingon the market and this can involve a lot of time and money.

If a registration is in the name of an individual or a partnership, it ismost likely that it will need to be replaced by a new registration in thename of a company. Even if an application mirrors the existingregistration, it is still subject to the same processing time (circa sixmonths) and costs (minimum $8,800).There are circumstances in which a non-corporate holder of aregistration can sell their business but the purchaser needs to alreadyhave a registration and will be required to apply for extensions to scopethat mirror those of the RTO being acquired. This limits the market andis not always the means preferred by the purchaser.

So if you are a prospective RTO seller, the first of your ducks to line up isto ensure the structure of your business is “sale-compatible”.Contact Russell Brockie to check your “readiness” for sale – and to findout how to maximise the value of your business.

Contact Info:Address:Broker Support Centre, Suite 104, BermudaPoint, 20 Lake Orr Drive. Varsity Lakes, QLD4227 AustraliaPhone number:1300 366 521 (toll-free)+61 7 5562 2711 (international)07 5562 2744 (fax)E-mail:[email protected]