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Apr 12, 2010

How Changes In Ownership May Affect Your Mod

Changes in Ownership

When an ownership change takes place for a particular company, the WCIRB must determine what to do with the historical data that has been generated by that company. This determination impacts the experience rating for that company. Generally, a change in ownership is defined as a transfer of an entity's operations or assets to another entity. Section II, Rule 3 of the Experience Rating Plan specifically defines a change in ownership for experience rating purposes, as follows:

All or a portion of the ownership in an entity is sold, transferred, or conveyed from one person to another
An entity is dissolved or non-operative and a new entity is formed
Two or more corporations undergo a statutory merger or consolidation
All or most of the tangible or intangible assets of an entity are sold, transferred, or conveyed to another entity
A trusteeship or receivership is set up, either voluntarily or at the direction of the courts, to operate a business
Once it is determined that a change in ownership has occurred, the next step is to determine whether the change was "nominal" or "material." The first step in analyzing any change in ownership is determining the names and ownership interest of all owners before and after the effective date of the change.