32.02.01.22

.22 Sale, Transfer, or Reorganization of Ownership or Control.

A. Sale or Transfer of Ownership or Control.

(1) Except as provided in §B of this regulation, a provider that holds an initial or renewal certificate of registration or a person with an ownership interest in or right to control that provider through governing body appointments or contractual or similar arrangements may not sell or otherwise transfer, directly or indirectly, more than 50 percent of the provider's ownership of a facility or more than 50 percent of the ownership of, or right to control, a person that owns or controls a facility, unless the provider or person obtains the approval of the Department to the sale or other transfer in accordance with §§C—F of this regulation.

(2) Any series of sales or other transfers within a 12-month period shall be aggregated for purposes of this regulation.

B. Exception for Business Reorganizations.

(1) This regulation does not apply if:

(a) A transfer of ownership of a facility, or a transfer of ownership or control of a person owning or controlling a facility, is part of a business reorganization; and

(b) The same party or parties holding a majority of ownership of, or right to control, the provider before the business reorganization will retain, directly or indirectly, a majority of the ownership of, or right to control, the provider after the business reorganization.

(2) If a sale or transfer of ownership satisfies the exception of §B(1) of this regulation, the provider shall give written notice to the Department and to the facility's subscribers 30 days before the business reorganization.

(3) The written notice to the Department required by §B(2) of this regulation shall include:

(a) A statement describing the reorganization in ownership including the new organizational structure;

(b) A copy of each corporate charter, articles of incorporation, bylaws, partnership agreements, articles of association, membership agreement, or trust agreement that will govern the legal organization of the provider after the sale or other transfer;

(c) A copy of the notice given to, or to be given to, the facility's subscribers; and

(d) Any further information the Department requires regarding the structure of the legal entities involved in the reorganization.

C. Request for Approval of a Sale or Transfer of Ownership or Control.

(1) A provider subject to §A of this regulation shall:

(a) At least 90 days before the proposed effective date of the sale or other transfer, file with the Department a statement of intent to transfer ownership or control; and

(b) At least 65 days before the proposed effective date of the sale or other transfer, give written notice of the proposed sale or other transfer to the subscribers of the affected facility and to the Department.

(2) The written notice required by §C(1)(b) of this regulation shall specify the following information, which also shall be provided to any subscriber of the affected facility upon request:

(a) The place and time for the meeting specified in §C(4) of this regulation;

(b) The address of the provider and the Department to which any comments may be sent;

(c) The name and address of the affected facility and the name and address of the new provider;

(d) The organizational structure and management of the provider and the facility after the proposed sale or other transfer is completed, including:

(i) If the provider is to be a corporation or limited liability company, then the name of the corporation or limited liability company, the state in which the corporation is incorporated or the limited liability company is formed, and the name of the chief executive officer of the provider,

(ii) If the provider is to be a partnership, then the names of the general partners, the state governing the formation of the partnership, and the name of the primary individual responsible for managing the partnership,

(iii) If the provider is to be an unincorporated association, then the names of the members, the state governing the unincorporated association's activities, and the name of the primary individual responsible for managing the association,

(iv) If the provider is to be a trust, then the name of each trustee, the names of the owners of the beneficial interests in the trust, the state whose law governs the trust, and the name of the primary individual responsible for overseeing the trust's activities,

(v) If the provider is to be a partnership having a corporation or limited liability company as one or more of its general partners, then the name of each corporation or limited liability company, the state in which the corporation is incorporated or the limited liability company is formed, and the name of the provider's chief executive officer, and

(vi) The names and occupations of each person who will be an officer, director, trustee, general partner, principal, or person with a 10 percent or greater equity or beneficial interest in the provider after the sale or other transfer;

(e) A copy of each corporate charter, articles of incorporation, bylaws, partnership agreement, articles of association, membership agreement, or trust agreement as it will pertain to the legal organization of the provider after the sale or other transfer;

(f) A statement as to:

(i) Any affiliation with a religious, charitable, or other nonprofit organization that will exist after the proposed sale or other transfer, and

(ii) The extent, if any, to which the affiliate organization will be responsible for the financial and contractual obligations of the provider;

(g) The name and address of each person that is likely to provide goods, premises, or services to the facility or provider after the sale or other transfer, which goods, premises, or services will have a value of $10,000 or more within any fiscal year;

(h) If a person identified in §C(2)(d)(vi) of this regulation has a 10 percent or greater financial interest in a person identified in §C(2)(g) of this regulation, then describe the goods, premises, or services to be provided to the facility or provider;

(i) A description of any proposed manager or management company that will manage the day-to-day operations of the facility after the sale or other transfer, including the business experience the manager or company has in operating or managing similar facilities;

(j) A description of each matter in which a person identified in §C(2)(d)(vi) of this regulation has:

(i) Been convicted of, or pleaded nolo contendere to, a felony charge involving fraud, embezzlement, fraudulent conversion, or misappropriation of property,

(ii) Been held liable, or enjoined by a final judgment, in a civil action involving fraud, embezzlement, fraudulent conversion, or misappropriation as a fiduciary,

(iii) Been subject to an effective injunctive or restrictive order of a court of record arising out of or relating to business activity or health care, including, actions affecting a license to operate a facility or service for aging, impaired, or dependent persons, or

(iv) Had any state or federal license or permit suspended or revoked within the past 10 years, as a result of an action brought by a governmental agency arising out of or relating to business activity or health care, including actions affecting a license to operate a facility or service for aging, impaired, or dependent persons;

(k) A financial plan, prepared by an authority recognized by the Department, in a form reasonably acceptable to the Department that:

(i) Demonstates the projected effects of the sale or other transfer on the financial operations of the provider and facility,

(ii) Includes any obligations of the provider to make payments in connection with the sale or other transfer from the financial resources of the provider,

(iii) Includes projected 10-year balance sheets, income statements, and cash flow statements each prepared in accordance with generally accepted accounting principles, and

(iv) Includes the key assumptions underlying the projected 10-year balance sheets, income statements, and cash flow statements;

(l) A statement from an authority recognized by the Department that is based on the financial plan and that concludes that the proposed change in ownership is not likely to have an unreasonably adverse effect on the provider's ability to perform its obligations under its agreements; and

(m) Any further information the Department requires.

(3) For the first 15 days after the provider gives the notice specified in §C(1)(b) of this regulation, subscribers may submit to the provider and to the Department written questions and comments on the proposed sale or other transfer.

(4) At least 18 days, but not later than the 25th day, after the notice specified in §C(1)(b) of this regulation is given, representatives of the provider shall hold a meeting with representatives of the subscribers of the affected facility to discuss the proposed sale or other transfer. Representatives of the subscribers may not exceed 15 in number. If a community has a resident association, the 15 representatives shall be chosen by the association. If the community does not have a resident association, the representatives shall be elected by the subscribers. The names and addresses of the subscriber representatives shall be given by those representatives to the provider and to the Department. Representatives of the Department may attend the meeting.

(5) For 10 days after the meeting specified in §C(4) of this regulation, subscribers may submit to the provider and to the Department additional written comments on the proposed sale or other transfer.

D. Approval of Sale or Transfer of Ownership or Control. By the 50th day after the date of the notice required by §C(1)(b) of this regulation, the Department shall issue an approval of the sale or other transfer, unless it determines that the sale or transfer is likely to have an unreasonably adverse impact on the financial stability of the provider or is likely to have an unreasonably adverse effect on a provider's capacity to perform its obligations under the continuing care agreements to which it is a party. The Department may extend the date for approval past the 50th day after the date of the notice required by §C(1)(b) of this regulation for good cause. The Department shall notify the provider and subscriber representatives in writing of its determination and rationale.

E. Appeal of Department Decision. The decision by the Department with respect to the proposed sale or other transfer is subject to appeal only by the provider in accordance with Regulation .36 of this chapter, and no other person shall be deemed to be a party in interest to the proceedings. If an appeal is taken by the provider, the Department shall give prompt notice of the appeal to the subscriber representatives. The Department shall give the subscriber representatives prompt notice of any decision rendered in the appeal.

F. Effective Date of Sale or Transfer of Ownership or Control. A sale or other transfer of ownership or control may not be completed until after the 15th day following the later of:

(1) The date the Department issues an approval specified in §D of this regulation; or

(2) If an appeal is taken under §E of this regulation, the day a hearing officer or administrative law judge renders a final decision permitting the sale or other transfer.