STRUCTURING YOUR RTO FOR SALE

Too often owners approach us to assist in selling their RTO only to find that the business is not saleable. Not only because it’s not profitable or has no students. But because its registration, – the very asset that a buyer must have in order to continue the business, cannot be used by a new owner. Let me explain… The education and training sector in Australia is highly regulated. The Australian Skills Quality Authority (ASQA) which is charged with the responsibility of enforcing the regulations will not permit the transfer of a registration. Only the person or entity to whom the registration was originally granted can use it. It follows therefore that if the grantee is an individual or partnership, no-one other than them can use it…because it cannot be transferred. Therefore if the business is structured as a sole 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, it is generally necessary to sell the shares in the company. All too often, the company is a corporate trustee for a trust and this can cause complications on sale as well. This structure is usually recommended by accountants for tax purposes when setting up the business but a lack of understanding of the regulatory requirements can lead to this having a detrimental effect when selling. It is most often necessary to separate the company from the trust before going on 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 is most likely that it will need to be replaced by a new registration in the name of a company. Even if an application mirrors the existing registration, it is still subject to the same processing time (circa six months) and costs (minimum $8,800). There are circumstances in which a non-corporate holder of a registration can sell their business but the purchaser needs to already have a registration and will be required to apply for extensions to scope that mirror those of the RTO being acquired. This limits the market and is not always the means preferred by the purchaser. So if you are a prospective RTO seller, the first of your ducks to line up is to ensure the structure of your business is “sale-compatible”. Contact Russell Brockie to check your “readiness” for sale – and to find out how to maximise the value of your business.