Interim Guidelines for the Consent by the Board of Regents to the Transfer of Authority to Confer Degrees upon the Change of Ownership of a Proprietary College

Introduction

In New York, approval of a transfer of ownership or control of a proprietary college is not required.  However, New York State Education Law specifies that degree-granting authority cannot be transferred via the sale of a proprietary college without the consent of the Board of Regents.  In addition, §3.58 of the Rules of the Board of Regents includes provisions requiring that the Board consent to the transfer of degree powers to a prospective owner of a degree-granting proprietary college prior to the purchase and following demonstration to the State Education Department of the new owner’s capacity to meet the education and fiscal standards to operate the institution before ownership is established.

Cited below are pertinent sections of the Education Law and of the Rules of the Board of Regents and links to other pertinent documents.

Regulatory Context

Section 224(1)(b) of Education Law prohibits individuals, associations, partnerships, or corporations operating educational institutions on a for-profit basis and holding degree-granting powers conferred by the Regents from conveying, assigning, or transferring such degree powers through a change of ownership.  Degree powers may be conveyed only with the consent of the Board of Regents.

Section 3.58(e)(6)(ii) of the Rules of the Board of Regents requires that the prospective owner must apply to the State Education Department for degree-conferring authority and submit documentation that substantiates the prospective owner’s capacity to operate the college.  In instances where there is a change of ownership within a family, the Department will tailor the request for evidence to meet the circumstances of the change in ownership. The specific provisions of this section are as follows:

  1. evidence confirming the prospective owner's capacity to operate the institution in compliance with the Education Law, program registration standards set forth in Part 52 of this Title, other Rules of the Board of Regents and Regulations of the Commissioner of Education, other State statutes and regulations, and Federal statutes and regulations, relevant to the operation of degree-granting institutions;
  2. evidence confirming that the prospective owner has sufficient financial resources to ensure satisfactory conduct of degree programs and achievement of the institution's stated educational goals;
  3. evidence of the prospective owner's experience operating an educational institution or other business or enterprise in an effective manner which demonstrates the prospective owner's capacity to operate a degree-granting institution;
  4. evidence that postsecondary education institutions that the prospective owner operates in New York State or elsewhere, if any, are in compliance with Federal and state statutes and regulations and accreditation requirements relevant to the operation of such institutions; and
  5. evidence that the prospective owner has not engaged in fraudulent or deceptive practices.

Section 3.58(e)(4) provides that the Board of Regents may limit or condition the degree-conferring authority of the proprietary college based upon the prospective owner’s capacity to meet the standards.

Section 3.58(e)(3) provides that the Department may expedite the time for the review of the transfer of degree-conferring authority in instances where the change of ownership or control of the institution is between family members, upon adequate showing of good cause.  Evidence of good cause will include but not be limited to evidence satisfactory to the Department that the change of ownership will not materially affect the management of the institution and that the change is in the best interest of students at the institution.

Section 3.58(e)(7)(i) provides that the Regents may consent to a temporary transfer of degree-conferring authority after the change of ownership or control of the institution has been made upon an adequate showing of good cause by the institution.  The good cause shall include but not be limited to evidence that conditions outside the new owner’s control caused the transfer of ownership or control of the institution prior to the institution obtaining the consent of the Regents for the transfer of degree-granting authority and that it is in the best interest of students to permit the institution to continue to offer degree programs.

Pertinent Links

Excerpts from the Regulations of the Commissioner of Education PDF Image Icon (490KB) .  Parts 50, 52, and 53 of these Regulations set out the quality standards for colleges and college programs in New York State.

Law Pamphlet 9 – Education Corporations

Protocols

Review protocols.  The information in support of consent to the transfer of degree authority that must be submitted by the prospective owner and the other protocols that may be required depend not only on the specific provisions of quality assurance in §3.58 of the Rules of the Board of Regents but also on such factors as whether there are ongoing or unresolved concerns about the institution, familiarity or lack of familiarity with or concerns about the prospective owner and the educational enterprises/activities with which the prospective owner has been associated, and the magnitude and/or types of institutional changes the prospective owner may wish to make.

Change of Ownership of an Existing Proprietary College Between Family Members.

  1. At least  180 days prior to the proposed date for the change of ownership or control (as defined in §3.58[a]) of a proprietary college, the prospective owner should undertake the following activities relating to consent to the transfer of degree-granting authority:
    1. Send a signed letter of application to the Associate Commissioner for the Office of Higher Education.  When the institution offers programs leading to professional licensure by the Board of Regents under Title VIII of the Education Law, the Office of the Professions will participate in the review of the application.
    2. Submit an application that includes the following information:
      1. A written statement that the change of ownership between family members will not materially affect the management of the institution or the registered programs offered by the institution, and that the expedited review is in the best interest of students at the institution.  This evidence should include a letter indicating the basis of the transfer of ownership and where appropriate, a statement that the new owner has no plans to change the mission, programs of study, staff, or faculty of the institution.  If the new owner intends to make substantive changes, evidence should be submitted, including a list of the registered programs that will be continued, and lists of current faculty and administrators that will be retained by the prospective owner.  Any proposed changes in the mission, goals, or objectives of the college should be described.
      2. A written statement of any felony convictions, or charges pending, in any court that could be related to the proposed owner(s), officers, directors of the institution, or of debarment from participation in federal programs, or a statement that they have no such convictions, pending charges, or debarments.
      3. The credit rating of the prospective owner from Experian, Equifax, or Trans Union, or their successors.
      4. In order to ensure the financial health of the institution under the prospective owner, the Department may, in some circumstances, request the Federal income tax returns (1040 plus schedules) of the prospective owner for the most recent three years.  The information need not be a part of the Initial application unless the prospective owner has been informed by the Department that the returns should be submitted.
    3. Schedule a meeting with the Office of Higher Education (OHE) and/or the Office of the Professionals (OP), as appropriate.
  2. Whether or not the Department will conduct an evaluative site visit to the institution, and the scope of the visit following review of the application submitted, will depend on such factors as whether there are ongoing or unresolved concerns about the institution or about the prospective owner.  If a visit is determined to be necessary, it will take place within no more than six months of the receipt of an application found by the Department to be complete.
  3. The Department will present a recommendation to the Board of Regents regarding consent to the transfer of degree authority to the prospective owner.
  4. The Regents may limit or condition the degree-conferring authority of the proprietary college under the prospective owner based upon the review of the owner’s capacity to meet standards.
  5. During the first five years following receipt of degree–conferring authority, the institution must notify OHE or OP, as appropriate, of any change in senior management of the institution.

Change of Ownership Not Between Family Members.

  1. At least 180 days prior to the proposed date for consummation of a change of ownership or control (as defined in §3.58[a]), an appropriate official of the proprietary college must notify the Associate Commissioner for the Office of Higher Education in writing of the proposed change and inform the prospective owner in writing (with a copy to the Associate Commissioner) that the Regents must approve the transfer of degree-granting authority prior to the change of ownership and that degree-granting authority is not transferred upon purchase or other change of ownership or control.  When the institution offers programs leading to professional licensure by the Board of Regents under Title VIII of the Education Law, the Office of the Professions will participate in the review of the application.
  2. Schedule a meeting with OHE and/or OP, as appropriate.
  3. At least 150 days prior to the proposed date for the change of ownership or control of a proprietary college, the prospective owner must submit to the Department the following materials in support of a request for consent to a transfer of degree-granting authority:
    1. A letter of application signed by the prospective proprietor or senior partner or, if a corporation, chief executive officer (not an attorney or other representative) of the proprietary institution that would have a change of ownership or control.
    2. Part I of the “Application by a Prospective Purchaser of a Proprietary College for Authority to Award Degrees” and certification of Part II.
  4. Within approximately three months of the finding by the Department that an application is complete, the Department will conduct a site visit to one or more degree-granting institutions owned by the applicant, if there are any such institutions.  The visit will include one or more staff members from OHE and/or OP, together with peer reviewers, as appropriate.  The purpose of the visit is to verify the information provided by the prospective owner in the Application and to assess the operation of the institution(s) in relation to the quality standards in Commissioner’s Regulations; and the administrative, fiscal, and academic competence of the prospective owner.  Following the visit, the Department will provide a draft report of the findings and recommendations of the visit to the institution.  The institution will then have an opportunity to respond to the findings and recommendations in the report and to request factual corrections in the draft report.  The Associate Commissioner for the Office of Higher Education or the Associate Commissioner for the Professions, as appropriate, will issue a final report that encompasses the draft report, the institution’s response, and provides the determination of the Department with respect to a recommendation to the Regents on consent to the transfer of authority to confer degrees.
  5. Following the issuance of the final report, the Department will present a recommendation to the Board of Regents regarding the consent to the transfer of degree authority to the prospective owner.
  6. The Regents may limit or condition the degree-conferring authority of the proprietary college under the prospective owner based upon the review of the owner’s capacity to meet standards.
  7. During the first five years following receipt of degree–conferring authority, the institution must notify OHE or OP, as appropriate, of any change in senior management of the institution.

Temporary Transfer of Degree Authority.

The Board of Regents may grant consent to a temporary transfer of degree-conferring authority in cases where the change of ownership or control of the institution has already been made upon an adequate showing of good cause by the institution and that the transfer would be in the best interests of the institution’s students.  The transfer of stock to an owner’s estate upon the owner’s death is not a change of ownership; the change of ownership occurs when title to the stock passes to the beneficiary or beneficiaries or is sold by the estate.  Temporary transfers are granted consent for an initial period not to exceed 180 days.

  1. Such an institution must apply for consent to a temporary transfer of degree-conferring authority as quickly as possible but in no case within more than two weeks following the change of ownership or control (as defined in §3.58[a]).  The application to be submitted to the Associate Commissioner for the Office of Higher Education should include:
    1. A letter of application signed by the proprietor or senior partner or, if a corporation, chief executive officer (not an attorney or other representative) of the proprietary institution.
    2. Evidence of consummation of the transfer of ownership or control.
    3. Evidence that conditions outside of the new owner’s control caused the transfer of ownership or control prior to obtaining the consent of the Regents to the transfer of degree authority and that the transfer is in the best interests of students.
    4. The information requested in Questions 1 though 12 of Part I of the “Application by a Prospective Owner of a Proprietary College for Authority to Award Degrees.”

When the institution offers programs leading to professional licensure by the Board of Regents under Title VIII of the Education Law, the Office of the Professions will participate in the review of the application.

  1. Before action by the Board of Regents on the application for consent to temporary transfer, the applicant must complete the remainder of Part I of the Application by a Prospective Owner for Authority to Award Degrees and complete the certification of Part II.
  2. The Department may request other information about the institution during its review and before making a recommendation to the Board of Regents.
  3. As soon as possible following receipt of an application found by the Department to be complete, the Department will conduct a site visit to the college.  The visit will include one or more staff members together with peer reviewers, as appropriate.  The purpose of the visit is to verify the information provided by the prospective owner in the Application and to assess: the operation of programs as registered; compliance with all of the quality standards in Commissioner’s Regulations; and administrative and fiscal capacity and academic competence.  Following the visit, the Department will provide a draft report of the findings and recommendations of the visit to the institution.  The institution will then have an opportunity to respond to the findings and recommendations in the report and to request factual corrections in the draft report.  The Associate Commissioner for the Office of Higher Education or the Associate Commissioner for the Office of the Professions, as appropriate, will issue a final report that encompasses the draft report and the institution’s response.
  4. The Department will notify the institution about its decision to present a recommendation to the Board of Regents concerning the temporary transfer of degree authority within 30 days of the finding by the Department that an application is complete.
  5. When the Department determines that it is in the best interests of students of the institution, it may require the institution to have a teach-out agreement with other institution(s) before making a positive recommendation to the Regents.  Such agreement provides for the continuity of educational services to students in the event that the Regents do not consent to the transfer of degree authority.
  6. The Regents consent to a temporary transfer may limit or condition the degree granting authority of the institution.  Temporary transfers are granted consent for an initial period not to exceed 180 days, but may be extended for additional periods by the Regents.
  7. The Regents may limit or condition the degree-conferring authority of the proprietary college under the new owner based upon the review of the owner’s capacity to meet standards.
  8. Following favorable action by the Board of Regents on the application for temporary transfer of authority to confer degrees, the new owner and the Department will complete steps D through F under Change of Ownership Not between Family Members, above.

Other Protocols for All Degree-Authority Requests.

Commissioner’s consent.  Proprietary colleges that are New York business corporations have certificates of incorporation (C of I) on file with the Department of State.  In the case of a sale, if the prospective owner wishes to change the corporate purposes of the college or the college’s name, the C of I would need to be amended and submitted for the consent of the Commissioner of Education.  The sale of the college, in and of itself, does not require an amendment of the C of I.  The “Frequently Asked Questions” of the Department’s Office of Counsel’s website describes the protocol for applying for Commissioner’s consent to a proposed amendment of a C of I.

Limitation on New Initiatives.

No major initiatives may be undertaken within two years of the new owner’s receipt of degree authority unless the change of ownership was between family members and did not materially affect the management of the institution or its registered programs.  The major initiatives are defined as expansion of degree programs to new discipline areas, new degree levels, or new extension centers or branch campuses.

Application By a Prospective Owner of a Proprietary College for Authority to Award Degrees--Interim Guidelines PDF Image Icon (35KB)

Certification of Continued Compliance of the Institution to be Acquired PDF Image Icon (60KB)