Prior Approval

Transactions Requiring Prior Commissioner Approval

Article 64A of Chapter 58 of the North Carolina General Statutes requires continuing care providers to obtain prior written approval from the Commissioner before consummating certain transactions that may materially affect a provider’s financial condition, operations, ownership, governance, or ability to meet continuing care obligations.

These approval requirements are intended to ensure that proposed transactions do not jeopardize the financial stability of a provider or prejudice the interests of residents.

Leasing of Real Property Used in Operations

N.C. Gen. Stat. § 58-64A-25

A provider must obtain prior written approval from the Commissioner before entering into, renewing, extending, or materially amending any lease of land or other real property used in the operation of a continuing care retirement community.

This requirement applies to:

  • Leases of land, buildings, or other real property used by the community
  • Lease amendments, extensions, or renewals
  • Related-party lease arrangements
  • Lease transactions entered into in connection with financing or restructuring transactions

Providers seeking approval must submit the proposed lease or amendment and any additional information required by the Commissioner. A lease subject to this section may not become effective unless and until written approval is issued by the Commissioner.

Purchase, Sale, or Transfer of Real Property or Ownership Interests

N.C. Gen. Stat. § 58-64A-230

A provider or any person who owns real property used in the operation of a continuing care retirement community must obtain prior approval from the Commissioner before consummating any of the following transactions:

  • Sale or transfer of real property used by a community
  • Sale-leaseback transactions
  • Transfer of any ownership interest in a continuing care retirement community
  • Purchase of real property currently leased and used in the community’s operations

Requests for approval must:

  • Be filed at least 45 days before consummating the transaction
  • Be made under oath or affirmation
  • Include information describing the transaction, the parties involved, and the financial impact on the provider

Following approval, the provider must notify affected residents and depositors in writing as required by statute.

Change of Control of a Provider

N.C. Gen. Stat. § 58-64A-235

Prior approval from the Commissioner is required before any person enters into an agreement to merge with, or otherwise acquire control of, a licensed provider.

Requests for approval must be submitted by the acquiring person and include detailed information regarding:

  • The acquiring person’s business operations and financial condition
  • The source and structure of transaction financing
  • Governance, management, and operational plans
  • The effect of the transaction on residents and continuing care obligations

Approval will be granted only if statutory requirements are satisfied and the transaction does not jeopardize the financial stability of the provider or prejudice the interests of residents. A provider must notify affected residents and depositors after approval is granted.

Third-Party Management Agreements

N.C. Gen. Stat. § 58-64A-240

A provider must obtain approval from the Commissioner before entering into a contract with a third party for the management of a continuing care retirement community.

A request for approval must include:

  • A copy of the proposed management contract
  • Information regarding the proposed manager’s experience and qualifications
  • Disclosure of any affiliations or relationships relevant under Article 64A
  • The reason for the proposed change in management

Providers must notify residents in writing of the request for approval within the timeframe required by statute. Providers are also required to remove a third-party manager if statutory disqualification conditions later arise.

Review Standards and Timing

The Commissioner will review approval requests in accordance with the statutory review schedule and approval standards set forth in Article 64A. Approval will be granted only if the proposed transaction:

  • Complies with applicable statutory requirements
  • Does not jeopardize the financial stability of the provider
  • Does not prejudice the interests of residents

Important Note

Submission of a request for approval does not constitute approval.

A transaction subject to Article 64A may not be consummated unless and until written approval is issued by the Commissioner.

Questions

Questions regarding transactions requiring prior approval should be directed to the Department’s Financial Oversight and Special Entities Division.

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