SBA Issues PPP Change-in-Ownership Guidance
The U.S. Small Business Administration (SBA) has issued a procedural notice providing new guidance regarding the procedures required for changes of ownership of an entity that has received Paycheck Protection Program (PPP) funds. The guidance also covers the responsibilities a borrower continues to hold regardless of a change in ownership.
The notice states that a change of ownership occurs in regard to PPP funds when at least one of the following is true:
- At least 20 percent of the common stock or other ownership interest of a borrower is sold or otherwise transferred in one or more transactions, including to an affiliate or an existing owner
- A borrower sells or otherwise transfers at least 50 percent of its assets in one or more transactions
- A borrower is merged with or into another entity
All sales or transfers that occurred since the date the loan was approved must be aggregated. For publicly traded borrowers, only sales or other transfers that result in one person or entity holding or owning at least 20 percent of common stock or other ownership interest must be aggregated.
Regardless of a change in ownership, the PPP borrower remains responsible for all obligations under the loan, including certifications made in connection with the loan application, compliance, and providing all required forms and supporting documentation.
Additionally, before closing a change-of-ownership transaction, a PPP borrower is required to notify the lender in writing of the proposed transaction as well as provide a copy of all documentation. The guidance also states some changes in ownership may require SBA approval, allowing 60 calendar days for review and determination of approval. The PPP lender must notify the SBA within five business days of the completion of a transaction and must continue submitting monthly 1502 reports until the loan is satisfied.
The notice also outlines the different procedures to be followed depending on whether or not the PPP note has been fully satisfied, as well as requirements when new owners or successors arising from a transaction have a separate PPP loan.
Read the full procedural notice at the SBA website.