HomePublicationsNewsletter ArchiveNewslettersVolume 18Issue 24Summer Compliance Series: Transfer of Ownership Interest

 In addition to its traditional coverage of developments in the state’s gaming industry, The Michigan Gaming Newsletter is proud to announce its first annual Summer Compliance Series. From June until the end of August, The Michigan Gaming Newsletter will be publishing a regular column in order to provide readers with a basic understanding of Michigan gaming regulatory structures and considerations. The following is a general discussion of the state’s compliance requirements and should not be considered legal advice.

As part of the continued reporting and monitoring requirements for casino operators and suppliers licensed by the Michigan Gaming Control Board (“MGCB”), licensees are required to receive MGCB approval prior to entering into a transaction that would result in a transfer of ownership in the licensee. These requirements are contained in Part 5 of the MGCB Administrative Rules (“Rules”) and are detailed in Board Resolution 2001-05 (“Resolution 2001-05”). Transfer of interest approvals are required in a number of circumstances, including when a licensee issues new company stock, repurchases existing stock, allows stockholders to transfer stock among each other, or any other transaction resulting in a change of ownership percentage among its stockholders.

When contemplating a transfer of interest, it is important to keep in mind that a transfer of interest must receive approval by the MGCB prior to the actual transfer. Though all transfers require prior approval, those meeting the thresholds set forth below must receive formal approval by Board order.

For publicly-traded licensees, the transfer of interest provisions requiring Board approval apply to those transfers that result in a party acquiring more than 5% ownership interest in the licensee. For privately held companies, the threshold for requiring prior transfer approval is set at 1% of the ownership interest in the licensee. Also, if the acquiring party is considered an “institutional investor” (generally, a financial institution that holds the interest for investment purposes only and meets the requirements of Section 6c of the Michigan Gaming Control and Revenue Act and related Rule provisions), then transfer approval is subject to Part 5 of the Rules and Resolution 2001-02.

For those parties that exceed the thresholds above, the MGCB will conduct a review of the interest holder and must find that the holder meets the relevant qualification and licensing standards contained in the Act and the Rules. Depending on the type and amount of interest sought, the acquiring party may be required to complete and file the appropriate licensing applications with the MGCB and receive MGCB approval prior to completing the transfer of interest (i.e., completion of the business disclosure or personal disclosure form).

For transfers of interest of less than 1% of the total ownership percentage in the licensee, Resolution 2001-05 delegates the authority for approval to the Executive Director and, therefore, formal approval by the Board is not required. Furthermore, qualification and suitability approvals are not required for these transfers, though the Executive Director may determine on a case-by-case basis that qualification and/or suitability may be required for certain parties to the transaction.

Those interested in learning more on the transfer of interest provisions for casino or supplier licensees can visit the MGCB’s website at the following link. The website provides additional detail on the transfer of interest process, as well as the appropriate forms to use when applying for a transfer of interest.

 

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