How Change in Control Works

Under Part 12 of the Financial Services and Markets Act 2000, anyone who decides to acquire or increase control over a UK authorised firm must get the regulator’s approval before completing. For most firms, control starts at a holding of 10% or more of the shares or voting power, with further thresholds as the holding increases. The rules capture individuals, companies and funds, and they look through holding structures to the ultimate controllers.

Once the regulator has a complete notice, it has a statutory assessment period of 60 working days to decide, which can be extended if it asks for more information. Completing an acquisition without approval is a criminal offence, so the timetable needs to be built into the transaction from the start. Payment and e-money institutions have equivalent change in control requirements under their own regulations.

The regulator assesses the acquirer’s reputation, financial soundness and ability to comply with regulatory requirements, and whether there are reasonable grounds to suspect money laundering or terrorist financing. It also looks at the acquirer’s plans for the firm, including any changes to its management.

Why the Senior Team Matters in a Change in Control

The Regulator Asks About It

A change in control notice includes information about the acquirer’s business plan for the firm. If the buyer intends to replace the chief executive, bring in a new finance director or restructure the board, the regulator will want to know, and those individuals will need approval as Senior Managers in their own right. Buyers who can present a clear plan for the senior team, with named individuals where possible, make the regulator’s assessment easier.

Key People May Leave

Acquisitions often trigger departures. Founders cash out, Senior Managers who were loyal to the previous owners move on, and uncertainty unsettles the wider team. If a compliance officer or MLRO leaves shortly after completion, the firm faces a gap in one of the areas the regulator watches most closely. Our article on Senior Manager Functions covers what each role is responsible for.

Accountability Doesn’t Pause

Throughout the transaction, the firm’s existing Senior Managers remain accountable for their areas. Integration work, system migrations and new reporting lines all create risks, and the Senior Managers need to be able to show they took reasonable steps to manage them.

Planning the Senior Team Before Completion

Map the Current Team

As part of due diligence, map the target’s Senior Managers against its Responsibilities Map. Identify who holds each function, how long they’ve been in post, whether they’re likely to stay and whether any are also shareholders who will receive significant proceeds. Check each individual on the FCA Register.

Decide What Changes

Decide early which roles will change after completion. Common changes include:

• a new chief executive or managing director from the acquirer’s side
• a new chair or additional non-executive directors representing the new owner
• a group finance director or CFO taking on finance oversight
• combining or separating compliance and MLRO roles to fit a group structure.

Each new Senior Manager needs regulatory approval before they can perform the function, and those applications can run in parallel with the change in control assessment if planned properly.

Retain the People You Need

Where the buyer wants existing Senior Managers to stay, retention arrangements should be agreed before completion. Knowing which people are critical, and what it will take to keep them through integration, is as important as the purchase price.

Plan for Departures

Even with retention plans, some people will leave. Buyers should have contingency plans for the most critical roles, including access to interim or fractional Senior Managers who can step in quickly. Our article on what to do when a Senior Manager resigns sets out the steps.

Due Diligence Questions About the Senior Team

Standard legal and financial due diligence rarely asks enough about the people who hold regulatory accountability. Buyers should add questions such as:

• Have any Senior Managers left in the past two years, and why?
• Are there any open regulatory matters, skilled person reviews or remediation programmes, and which Senior Manager owns each one?
• How do the Senior Managers’ Statements of Responsibilities fit together, and are there any gaps or overlaps?
• Which Senior Managers hold shares or options that will vest on completion?
• Are any functions held by fractional or outsourced individuals, and on what terms?

The answers often reveal more about the firm’s regulatory risk than the compliance policies themselves. A firm with frequent Senior Manager turnover, or with open issues owned by people who are about to leave, needs a stronger plan for the period after completion.

Board Changes After Completion

New owners often want to reshape the board, adding their own representatives and sometimes independent non-executives. For firms where board roles carry Senior Manager Functions, such as the Chair at Core and Enhanced firms and committee chairs at Enhanced firms, these appointments need approval.

Buyers should also consider independence. A board made up entirely of the acquirer’s executives may struggle to provide the independent challenge the regulator expects, particularly where the firm serves retail customers. Our sister practice NED Capital specialises in independent non-executive and chair appointments, including post-acquisition board refreshes for regulated firms.

Consolidators and Serial Acquirers

Consolidators buying several regulated firms face particular challenges. The regulator has shown increasing interest in how consolidation models work, including whether acquired firms retain enough local governance and how group-level Senior Managers oversee many businesses at once. Consolidators should think carefully about:

• which Senior Manager Functions sit at group level and which at each regulated entity
• whether group-level individuals have the time and knowledge to oversee each business properly
• how the Responsibilities Maps of each firm fit together
• how compliance and financial crime oversight will work across the group.

A governance and SMF structure review can help consolidators design a structure that works across the group and stands up to supervisory scrutiny.

A Checklist for Buyers

• Build the 60-working-day change in control assessment into the deal timetable.
• Map the target’s Senior Managers and Prescribed Responsibilities during due diligence.
• Decide which roles will change and identify candidates early.
• Plan Senior Manager approvals to run in parallel with the change in control assessment.
• Agree retention arrangements with critical individuals before completion.
• Arrange contingency cover for key control functions.
• Review board composition and independence for the post-completion business.

The Bottom Line

Change in control approval gets the deal done. The senior team determines whether the business thrives afterwards. Buyers who plan Senior Manager appointments, retention and board changes as part of the transaction, rather than after completion, avoid the governance gaps that most often draw regulatory attention to newly acquired firms.