Buying an E-Money Institution that is duly authorized but has not operated is a popular inquiry among the individuals that are willing to operate in a financial market. However, there are a lot of pitfalls in getting relevant information when it comes to acquiring or selling an authorized company. In this article, we will provide a list of important check-points associated with the acquisition of an EMI license for sale that will help market players to avoid costly mistakes.
Most often, a purchaser of an AEMI is driven by the speed of the buying process. There is an illusion that acquiring an already existing and licensed institution ensures a shorter timeframe for the market entry and hassle-free start of operations compared with applying for necessary approvals from scratch. Such suppositions are erroneous, as each purchaser should firstly perform a robust audit of the regulatory compliance of a company, then make sure all appropriate documents for the deal are well-prepared and provide an appeal for the change of ownership to best communicate with regulatory authorities. The full change of ownership process normally lasts the same period as a new authorization process from its beginning to the end and is usually finished in 6 months.
Another false supposition is that an investment in an AEMI offers a shorter period for the launch of the purchaser’s products and services. It would include risks for the purchaser and must be checked by the regulatory body if new offerings are introduced to clients prior to the confirmation of the change of ownership appeal.
Let’s take a look at the legislation regulating EMIs. Under UK law, a firm with an EMI license must inform the FCA if any changes occurred. Also, EMIs fall under the Principle for Businesses (PRIN) which requires these institutions to apprise the FCA of each important matter that the regulatory body would expect to be informed about.
The launch of any product or service entails a consideration of the risk management approach to guarantee the coverage of all the facets of the purchaser’s offerings. In some cases, it would not be possible, since the infrastructure of the acquired firm is not suitable for such products, or the ultimate consumer agreement must be duly amended and contingent on regulations, such change necessitate a 60-day notification to the ultimate consumer. Also, the introduction of new services may not be completed if the firm has no appropriate approvals. To be eligible to offer new services or products, the firm would need to communicate with the regulatory body about it and receive permission before the rollout of these services.
A purchaser of an EMI for sale needs to be aware of the regulative rules as to the deal which we will consider below:
The purchaser is not allowed to be in charge of the top-level employees of the company unless the change of ownership permission is issued and the executive management appointed by the purchaser is verified as working with the firm. Normally, the purchaser is applying for this approval simultaneously with the provision of a change of ownership appeal. The new owner of the firm is required to prepare a new operational model. Provision of the documents under which the firm was authorized is not the correct step. Since a new client service may be rolled out, a new risk management program must be completed. The change of ownership is deemed by the regulatory bodies to be equal to the new authorization, so be mindful that if the institution is already authorized, the transfer of ownership will not be hassle-free, likely it won’t be.
You should understand that agreeing on the legally binding contract outlining the agreed-upon terms of the purchaser and seller of business (SPA) and closing it without effective DD could be highly risky. That’s why even if you are considering a company without active business operations or significant assets, please take into account performing efficient DD, focusing on the following:
In regard to aspects of operating and management of an EMI for sale, it crucial is to consider the following:
Choosing between an EMI for sale and a new license, such aspects as the terms of receiving change of ownership approval or a new authorization are not decisive factors, as both are equivalent in that relation. However, purchasing a ready-made EMI that comes without IP technologies, 3rd-party contracts, and client base is not a good choice, as the main value of such a company is the license itself.
New authorization will be 2-4 times cheaper and will last approximately the same time as the acquisition of a ready-made company. Moreover, with a new license, you don’t need to think about possible liabilities, veiled obligations, client complaints, and many other crucial matters that may catch you after purchasing a shell. However, the purchase of an operational company is justified when you are acquiring an existing lucrative company with proprietary technology and a client base where everything is ready to start the ball rolling.
If you are looking for an EMI for sale or willing to apply for a new EMI license, Eternity Law International will gladly assist in this regard. Our lawyers are committed to providing you a comprehensive support at each step of the application and purchase process. To learn more, please contact our specialists. You can also see our offers in the categories “Ready-made companies”, “Licenses for sale” and “Banks for sale”.
The international company Eternity Law International provides professional services in the field of international consulting, auditing services, legal and tax services.