RTO Change of Ownership

On the 31st October 2019, the National Regulator implemented a new policy relating to the change of ownership of an existing RTO. I have had an opportunity to review the new self-assessment document and guide and have put together this article to explain the requirements to those considering the purchase or sale of an RTO. You can access the self-assessment document and guide at the following link:

https://www.asqa.gov.au/sites/default/files/201910/self-assessment-change-

There is a lot of complexity here so I thought I would break it down to some key points:

Essentially submitting an application for change of RTO ownership (where the RTO is not operating) is basically the same as submitting an application for a brand-new RTO registration.
If the RTO is operating with ongoing enrolments, etc, then the evidence requirement is slightly reduced to only Part A of the self-assessment.
There is no application fee for a change of ownership notification because it is essentially a notification of material change in the RTO operation.
The notification needs to be accompanied by a completed self-assessment which is about a 40 page document that covers the same clauses and standards as initial registration and requires the same level of evidence.
Once the application is submitted with the supporting evidence, there is no further opportunity to supply additional or updated evidence. Same as initial registration.
The notification for change of ownership may be subject to a regulatory audit which also means that the regulator will charge a fee to the registered entity for the conduct of the audit. We have submitted lots of these applications for clients and they have never triggered an audit. I imagine that if the evidence that you submit is non-compliant, it could trigger an audit.
If the audit results in non-compliance, the regulator may issue a written direction to address the non-compliance, or impose conditions on the registration, for issue a notice of intent to impose sanctions or cancelled the registration. In other words, the transaction of selling the RTO now triggers a full regulatory audit and this exposes the organisation to regulatory risk. This means that the evidence submitted in the self-assessment must be highly compliant. Same as initial registration.
The regulator has also identified that an RTO that has a change of ownership will also face additional scrutiny in the 12 months after the compliance activity is finalised. This scrutiny will be applied to any applications to change scope of registration from training providers during this period, and through a provider review at the conclusion of the period. Both of these activities may trigger regulatory action, which could include further compliance audits.
The application is submitted on ASQAnet as a material change notification. This notification must be made as soon as practicable after the event and no later than 90 calendar days after. You definitely do not want to delay the notification.

Just as a little commentary, essentially the application is the same as an initial registration. The only advantage in going down this pathway is that the organisation which is purchasing the RTO can start using its registration immediately as opposed to waiting the 8 to 12 months time frame to achieve initial registration. The cost of the change of ownership could potentially be more than initial registration application fee and you have the additional scrutiny for the first 12 months as opposed to initial registration where this additional scrutiny is 24 months.

Notification and Evidence Requirements

The fact sheet is fairly clear, but I did need to read it a couple of time to make full sense of the requirements to notify the regulator of the change and what evidence must be submitted with the material change notification. Here is a break down:

1% up to 14% Ownership Change in 12 months. No notification or evidence required.

15% up to 49% Ownership Change in 12 months. Material Change Notification required with a Fit and Proper Person declaration of any new owners.

50% up to 99% Ownership Change in 12 months. Material Change Notification required with a Fit and Proper Person declaration of any new owners and the Part A additional evidence.

100% Ownership Change in 12 months. Material Change Notification required with a Fit and Proper Person declaration of any new owners and the Part A and B additional evidence only if the RTO has no ongoing students, or had no more than 10 students complete a course within the previous 12 months of registration. So, if you have any ongoing students or had more that 10 student complete a course in the previous 12 months than you will only be required to submit Part A.

I can only assume that the rationale for the “no ongoing students or less then 10 student completions in the last 12 months” is to require the additional evidence under part B particularly in situations where an RTO may have been registered for the purpose of selling. The commodification of an RTO registration is really the practice that this policy is targeting and so, it is reasonable that additional evidence is required in this fairly narrow circumstance.

Additional Evidence that must be submitted with the change of ownership notification

The evidence which must be submitted with the self-assessment includes:

ASQA Self-assessment for Change of Ownership (click) including the following supporting evidence:

Section 1—Training and assessment (Part A)

training and assessment strategies for each training product being applied for (Click). Each training and assessment strategy must provide evidence about:
- the training product code and title
- describe the target cohort / learner
- entry requirements
- nominated units of competency
- pre-requisites or co-requisites
- sequence of unit delivery
- details of the amount of training
- statement of rationale justifying the amount of training
- strategies to vary the amount of training for learners with different needs
- work placement arrangements / requirements
- planned assessment activities, methods and events
- planned assessment resources
- details of planned student and teacher ratios
- other resources required for training and assessment including learning resources, human resources and physical resources such as equipment
- arrangements for ongoing review and continuous improvement of the training and assessment strategy
- arrangements for work placement and structured workplace learning
- detailed course program that identifies the planned learning and assessment activities and shows how these are sequenced and structured over the course duration
details of class scheduling arrangements including timetabling documents for each delivery location
list of developed learning resources that support the delivery of each unit of competency including learning references, learner guides, presentation tools, practical activity instructions, et cetera
list of all assessment tools that support the delivery of each unit of competency including assessor instructions, marking guides, recording tools, mapping documents, learner instructions, et cetera
list of all equipment and resources that support the delivery of each unit of competency that are owned by the RTO
details of workplace resources where these are being accessed within a workplace including all facilities and equipment relating to the range of planned work of the learner (if applicable)
details of work placement arrangements including templates to be used for determining the suitability of workplace, supervision requirements, minimum equipment and resource requirements, scope of work requirements, et cetera (if applicable)
evidence of ownership, lease or access agreement for any planned delivery sites where training and assessment will be conducted
floorplans of proposed delivery sites showing areas to be used for classroom training, practical application and skill development, amenities and breakout areas
contractual agreement with an employer where training and assessment is to be conducted at specific employer premises (if applicable)

Section 2—Regulatory compliance and governance (Part A)

Financial Viability Risk Assessment (click) with the following supporting documents:

business plan which provides the following information:
- a company overview, description of the business including funding sources, target market, identified student cohort, key clients and industries, proposed courses, operating locations, equipment and facilities
- business goals and objectives
- strategic long-term direction of the organisation as a registered training organisation
- market analysis of industry including locations, methods of delivery, industry demand and competitor analysis
- analysis of business strengths, weaknesses, opportunities and threats
- information about the organisation structure including position titles and names of staff members
- Proposed RTO Details, including:
  - entity details
  - type of training organisation
  - group structure
  - key personnel
  - delivery sites
  - fee payment protection arrangements
  - status of current superannuation liabilities
  - status of PAYG/GST liabilities
  - basis of accounting
  - insurance coverage including public liability and WorkCover
  - unresolved legal disputes
  - contingent liabilities in existence
  - contingent access to funding options
- Financial projections for at least the next 24 months, including:
  - profit and loss forecast
  - balance sheets
  - cash flow forecasts
  - bank account, debtors and creditors
  - forecast student numbers and course fees
  - forecast operating expenses
- Financial viability supporting evidence requirements:
  - Signed nominated accountants certificate
  - Completed Financial Viability Risk Assessment Spreadsheet
  - Business Plan with attached financial projections
  - Financial statements (last two years)
  - Bank statements – within 1 week of application
  - Bank statements – as at most recent month end
  - Bank statements – as at most recent financial year end
  - Bank reconciliations – as at most recent financial year end
  - Bank reconciliations – as at most recent month end
  - ATO Portal – integrated client account
  - ATO repayment plan (if applicable)
  - Aged debtors ledger- as at most recent financial year end (if applicable)
  - Aged debtors ledger- as at most recent month end (if applicable)
  - Aged creditors ledger- as at most recent financial year end (if applicable)
  - Aged creditors ledger- as at most recent month end (if applicable)
  - Deed of guarantees or other legally enforceable instruments (if applicable)

Section 3—Marketing and recruitment (Part B)

the planned course brochures that will be used for the purposes of advertising and marketing for each training product
Policy and procedure for marketing and advertising

Section 4—Enrolment (Part B)

the planned learner handbook that will be supplied to prospective learners prior to their enrolment to inform them about their rights and obligations
the planned fee schedule that will be supplied to prospective learners prior to their enrolment to inform them about fees and related charges
customised learner enrolment application and declaration/agreement
customised enrolment interview form to determine the learners training and learner support requirements
policy and procedure for learner enrolment
policy and procedure for fees and payments and refunds

Section 5—Support and progression (Part B)

third party agreements with external support service providers (if applicable)
policy and procedure for learner support services
policy and procedure for core skills assessment
copy of LLN assessment tools and guides

Section 6 —Training and assessment (Part B)

evidence of industry engagement that has been undertaken to inform the relevance of the training and assessment being provided. This needs to include the details of the industry representatives that were engaged with, the lessons learned and evidence of how these lessons were taken into account in the development of the course.
details of staff members or external providers who are nominated to provide support services (if applicable)
Complete assessment tools and resources for each unit of competency nominated for explicit delivery. This needs to include detailed instructions for the candidate, instructions for the assessor, assessment recording tools, assessment mapping and any supporting documents such as templates and policies.
List of complete assessment tools and resources for each unit of competency nominated for explicit delivery in support of a qualification. This needs to include detailed instructions for the candidate, instructions for the assessor, assessment recording tools, assessment mapping and any supporting documents such as templates and policies.
Policy and procedure for competency assessment
evidence of employment agreements or contracts with all planned trainers and assessors including employees and contractors
Evidence that verifies the competency and currency of nominated trainers, including a certified and scanned copy of relevant vocational qualifications and certificates, training and assessment qualification, certificates relating to recent professional development, staff matrix, professional development plan, evidence of industry currency and ongoing practice

Section 7—Regulatory compliance and governance (Part B)

Third party written agreements for organisations or persons delivering services on behalf of the RTO (if applicable)
Policy and procedure to manage third party arrangements (if applicable)
example AQF certificate including both a qualification certificate and example statement of attainment
Policy and procedure for issuing AQF certificates

Other Evidence

Entity records including:
- ASIC company certificate
- ASIC company historical extract
- ASIC business name registration
- ABN certificate
- ASIC company historical extract of parent entities (showing change of ownership)
Change of Chief Executive Officer Statutory Declaration (click). To be completed and submitted by the newly appointed chief executive officer.
Fit and Proper Person Requirements Declaration (click) from the following persons:
- Executive officer/s. An executive officer is any person who takes part in the management of your organisation or is partly responsible for the management or decision making for your organisation.
  - Examples of ‘executive officers’ that must complete a Fit and proper person declaration include:
    - a director of the company
    - a secretary of the company
    - a chief executive of the RTO
    - a principal executive officer of the CRICOS provider
- High managerial agent/s. A high managerial agent is an employee or agent who represents your organisation in relation to the business of providing courses.
  - Examples of ‘high managerial agents’ where ASQA may request completion of a FPP declaration include:
    - a consultant or employee with an ongoing role related to regulatory compliance
    - a consultant or employee who represents your organisation at audit
    - an agent who recruits students on behalf of your organisation, or
    - people employed by third-party organisations who fulfil any of the roles described above on behalf of your organisation
    - people employed by third-party organisations who provide training and/or assessment on behalf of your organisation.
- Owners and executive officers. The term ‘owner and executive officer’ includes:
  - any person who owns 15 per cent or more of your organisation
  - any person who is entitled to receive 15 per cent or more of
  - dividends paid by your organisation
  - any trustees of a trust associated with the organisation
    relevant persons in associated entities.

When planning the purchase or sale of an RTO, the regulatory requirements relating to the sale must be considered and incorporated into the sale process. Buyers of an RTO should be extremely wary of any RTO that is for sale that does not fully inform the purchaser of these requirements and establishes arrangements to comply with these requirements as part of the sale process. Importantly, you need to consider who is going to meet the cost of this change of ownership notification and who is going to prepare all of the evidence for the submission. This also needs to take into account if non-compliance is identified during this process and any possible sanctions or written directions. We do provide a service to assist clients with the change of ownership notification process which is outlined at the following page:

https://newberyconsulting.com.au/product/change-of-ownership/

Good training,

Joe Newbery

Published: 14th November 2019

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