Ownership Changes and Internal Corporate Reorganizations May Require FCC Approval

Alarm service providers and equipment manufacturers should keep in mind FCC approval is required for most ownership changes.  If radio licenses are involved, prior FCC approval is generally required, although there may be ways to significantly reduce the usual 90 to 120 day approval time, using the FCC’s “conditional temporary licensing” mechanism (depending on the type of licenses involved).  For equipment manufacturers, the FCC generally must be notified of ownership changes that affect FCC equipment certifications within 60 days after the closing.  But some manufacturers also have radio licenses (such as demonstration licenses) that may require prior approval filings.

These entities should also keep in mind that many types of reorganizations, estate planning and tax savings activities and other transactions require prior FCC approval. Companies planning on such transactions should determine whether they must file an application for FCC approval, and obtain a grant, before closing the transaction.  Transactions requiring prior FCC approval include (but are not limited to):

  • The distribution of stock to family members in connection with estate planning, tax and other business activities, if there are changes to the control levels discussed above; Any sale of a company that holds FCC licenses;
  • Any sale, transfer or lease of an FCC license;
  • A change in the form of organization from a corporation to an LLC, or vice versa, even though such changes are not regarded as a change in entity under state law.
  • Any transfer of stock that results in a shareholder attaining a 50% or greater ownership level, or a shareholder relinquishing a 50% or greater ownership level;
  • Any transfer of stock, partnership or LLC interests that would have a cumulative effect on 50% or more of the ownership.
  • The creation of a holding company or trust to hold the stock of an FCC license holder;
  • The creation of new classes of stockholders that affect the control structure of an FCC license holder.
  • Certain minority ownership changes can require FCC approval (e.g., transfer of a minority stock interest, giving the recipient extraordinary voting rights or powers through officer or board position).
  • The conversion of a corporate entity or partnership into another form of organization under state law – e.g., from corporation to LLC or partnership to LLP and vice versa.

–Contributed by CSAA Counsel John Prendergast (Blooston, Mordofsky, Dickens, Duffy, and Prendergast, Washington, DC)

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