The Gambling Commission’s E-bulletin of 4 April 2022 set out a stricter approach on late Change of Corporate Control applications. Although this does not amount to a change in the rules, the potential consequences of not meeting the Gambling Commission’s deadline means that internal procedures should be re-evaluated.
What is a Change of Corporate Control?
For the purposes of the Gambling Act 2005 (the Act), a Controller is a legal person directly or indirectly who:
- owns 10% or more of the shares;
- is entitled to 10% or more of the rights to profits or dividends;
- has 10% or more of voting power; or
- is able to exercise significant influence,
over the management of an existing licensed operator.
Therefore, a change of corporate control (CoCC) occurs when there is a new Controller. The Act currently requires a CoCC application (and its associated fee) to be submitted to the Gambling Commission (the Commission) within five weeks of the change of control occurring for the licence to continue to have effect. Additionally, the Commission requires notification of the CoCC within five days of the CoCC as a key event.
Should a CoCC application not be submitted within the deadline, the Act grants the Commission the power to revoke the licence without a review. Such an event could have disastrous consequences for a business.
Until now, the Commission has generally been willing to grant an extension of the deadline to submit a CoCC application provided that the licensee is able to offer a reason for the delay which is ‘adequate and reasonable’. Whilst the Commission has not been prescriptive about what might constitute an adequate and reasonable excuse, it has typically taken a flexible and reasonably tolerant approach.
A Stricter Approach
In its fortnightly E-bulletin of 4 April 2022, the Commission indicated that it will begin to take a stricter approach on late applications from July 2022.
If the five-week deadline is missed and the excuse provided is not ‘adequate or reasonable’, the Commission has indicated that no extension will granted and the licence will be revoked if the new Controller is not already a licensee and not regulated by the FCA (Financial Conduct Authority) or an immediate family member entering a small family business.
The Commission has explained that this change of policy is due to an increase in the complexity and number of CoCC applications.
Missing the deadline and having a licence revoked could have disastrous consequence on a business. In circumstances where only the most egregious breaches of licence conditions typically result in the revocation of licences (as opposed to the imposition of other tough measures such as licence suspensions, fines, regulatory settlements, remedial activity and additional licence conditions), it does seem somewhat at odds with broader regulatory principles for the Commission to threaten the nuclear option of licence revocation for what can, in many cases, be a simple oversight or individual human error with no adverse consequences for any consumer.
Nevertheless, operators would be wise to ensure that adequate and robust internal systems are put in place to ensure those responsible for compliance in Great Britain are aware of any changes in corporate ownership (including share fluctuations for listed operators and their parent companies) at the earliest opportunity, to help ensure that the Commission’s five week deadline is met.