Mark Pestronk
Q: If I sell my agency to my manager or a group of employees including my manager, I imagine that the process of ARC approval of a change of ownership would be a simple notice about who the new owner is. Does ARC have to approve the owner? If so, can I do that before the closing of the sale, or do I have to wait for ARC's approval? What about Iatan?
A: If you sell or otherwise transfer all your ownership to anyone, ARC must approve the change of ownership. It makes no difference whether the new owner currently works at your agency.
If the buyer does not currently own an ARC-appointed agency, the ARC approval process is complicated and lengthy, so much so that some parties never get around to applying for approval of the change. This is a huge mistake because ARC and the airlines will try to hold you responsible in case the owner defaults.
If you sell your company's assets (as opposed to its corporate stock or limited liability company ownership units), the parties must file an ARC application which is 15 pages long, and there is a lengthy checklist of additional documents to be submitted. Those include a new bond, letter of credit or cash deposit, a $2,000 filing fee, personal histories on a five-page form, a business license and a copy of the purchase agreement.
If you sell your company's corporate stock or limited liability company interest, there is a slightly shorter form and checklist, with a $900 filing fee. If the buyer is a corporation or a subsidiary of another corporation, the details of the ownership structure need to be disclosed.
In addition to the required forms and documents for either type of sale, "ARC reserves the right to request additional documents deemed necessary to verify or investigate information provided in the application."
ARC inevitably asks for more information or more documents. Then, ARC often visits the location and interviews the owner to make sure that he or she is really the person listed and has the necessary qualifications.
Realistically, the process takes two to four months. In the meantime, it is important not to relinquish control of ticketing and reporting, unless you trust the owner with your checkbook and your assets.
Because the application process is daunting and its timing unpredictable, most sales go to closing before the parties apply for ARC approval. They ignore the rule in Section 16.1 of the Agent Reporting Agreement that the agreement may not be transferred "without the prior written approval of ARC."
You don't need an attorney to draft the application, although you should have one available to answer questions. In addition, there is at least one consultant who drafts the applications and works with ARC. Contact information can be found at www.whitehousetravelconsulting.com.
If your agency does not do much ticketing, one viable alternative may be to terminate your ARC appointment and have the new owner obtain tickets from a host agency.
Iatan also requires approval of a change of ownership, and its applications forms partially mirror ARC's. Typically, the parties file with Iatan after ARC approval has come through.