Utah’s Transfer of Retail License Act (the “Act”), which becomes effective today, permits the transfer and sale of retail liquor licenses by current retail license holders. Although enacted in 2011, the legislature previously delayed implementing the Act in response to concerns that the creation of a private market for retail licenses would drive up prices and create additional barriers to entry for small businesses. The legislature opted against further extending the effective date of the Act during the last session. Consequently, current holders of retail licenses, such as restaurant and club licenses, are now able to sell and transfer these licenses subject to the provisions of the Act.
To transfer a retail license, a proposed buyer first has to file a notice of intended transfer with the Department of Alcoholic Beverage Control (the “DABC”) at least 10 days before filing a transfer application. The buyer must include a statement regarding the amount to be paid to the license holder for the transfer. If the transfer includes payment to the license holder, steps are required to protect any creditors of the license holder. The license holder must provide the buyer with a list of creditors with claims against the license holder. The license holder and buyer also have to establish an escrow [with an approved institution] into which any payment for the license will be deposited. The Act sets forth the priority for disbursement of payment, with claims for back taxes and wages and other secured and statutory claims have priority over the license holder. Escrow is not required for transfers that do not include payment for the license.
Before the Commission can approve the transfer, the DABC is required to conduct an investigation and may hold public hearings to gather information and make recommendations to the Commission as to whether the transfer should be approved. The Commission may not, however, approve a transfer of a retail license between two different counties or to an entity that is not eligible to hold that type of retail license.
The Act also applies to certain changes in ownership of a business entity that currently holds a retail license. Each of the following must comply with the Act:
- a change in ownership of 51% or more of the shares of stock of a corporation;
- admission of a new general partner into a partnership or when 51% or more of the capital or profits of a limited partnership is acquired by or transferred to others as general or limited partners; and
- a change in ownership of 51% or more of the interests in a limited liability company.
Importantly, if a license holder fails to comply with the provisions of the Act within 30 days following one of the changes noted above, the retail license is automatically forfeited. Additionally, the Commission may void any transfers of retail licenses that violate the provisions of the Act and require the forfeiture of the retail license.
The DABC anticipates that the process to review and approve transfer applications will take at least 45 to 60 days. Application forms and materials should be available on the DABC website beginning today. Please contact me or Catherine Parrish Lake with questions about the Act or for assistance with the license transfer process.