Change of control
The model clauses do not impose any requirement for approval of a change of control of a Licensee, for example, a corporate takeover, but they do grant NSTA the power to require a further change of control, and failing that a power of revocation.
This may mean the complete revocation of the licence, or partial revocation in respect of the company concerned, which in practical terms amounts to the removal of the company from the licence, while the licence continues in the hands of its former partners.
The existence of this power can result in a request for comfort that the NSTA is not minded to exercise it. We are generally willing to consider such requests, but we will not fetter our own discretion; any comfort we give will be based on the information available to us at the time, and limited accordingly.
Our policy requirement when deciding whether to exercise the change of control powers and when deciding whether to issue comfort in respect of them is that the Licensee can demonstrate that the change of control will not prejudice the ability of the Licensee to meet its licence commitments, liabilities and obligations.
In taking its decision, the NSTA may also consider the fitness of directors and other persons (real or corporate) who will exercise control over the Licensee post- the change of control. The NSTA’s fitness criteria are set out here.
The NSTA’s indicative timelines for considering change of control matters are set out here.
Letter to licensees on the NSTA’s approach to changes of control
On 3 December 2021, the NSTA Director of Regulation, Tom Wheeler wrote to all licensees restating how the NSTA takes decisions on the exercise of its change of control powers. A copy of that letter can be found here.
Information and documentation requirements
Details of the change of control should be emailed to email@example.com and include the following information:
- the name of the new corporate parent, country of incorporation and company registration number
- a post-change of control pro-forma balance sheet for the licensee and a consolidated post-change of control pro-forma balance sheet for the new corporate parent
- a list from the new corporate parent of its prospective subsidiary’s UKCS licence holdings and commitments (especially those arising from work programmes, from the fallow initiative or the asset stewardship process) and a statement that it will support the licensee in meeting these commitments.
Parent company guarantees
Where a licensee is dependent on the financial support of its current corporate parent to enable it to meet its licence obligations and will become reliant on the financial support of its new corporate parent, the NSTA will require a parent company guarantee from the new corporate parent to replace any existing parent company guarantee which may have been issued. The NSTA’s forms of words for parent company guarantees may be found here.
We require any new parent company guarantee to be issued on or immediately following the date on which the change of control becomes effective. Parent company guarantees should be on the corporate stationery of the new corporate parent and should use one of the two prescribed forms of words included with our Financial guidance (PDF, 267KB, 9 pages).
Failure by the new corporate parent to provide a parent company guarantee in one of the two prescribed formats may constitute sufficient grounds for the NSTA to invoke its powers under the model clauses to either order a further change of control or to revoke any UK petroleum licences held by the licensee.