WASHINGTON—The Small Business Administration (SBA) has released a new procedural notice detailing the required procedures for changes of ownership of an entity that has received Paycheck Protection Program (PPP) funds.
According to the notice, a change of ownership occurs when:
- At least 20% of the common stock or the other ownership interest of a PPP borrower is sold or otherwise transferred, including to an affiliate or an existing owner of the entity
- The PPP borrower sells or otherwise transfers at least 50% of its assets
- A PPP borrower is merged with or into another entity
However, regardless of a change of ownership, a PPP borrower is still responsible for all performance obligations, certifications, and retaining all documentation. The lender is also required to submit the monthly 1502 reports until the loan is satisfied.
The PPP borrower must notify the PPP lender in writing of the contemplated change of ownership transaction before its closing, as well as provide the lender with a copy of the proposed agreements or other documents that would effectuate the proposed transaction.
Different Procedures Outlined
The procedural notice outlines different procedures for notifying the SBA, depending on the circumstances of the change of ownership. It also flags requirements if the PPP loan has been pledged to the Federal Reserve's PPP Liquidity facility, NAFCU said.
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