Number: INST.B.20.040

An institution shall receive HLC approval prior to undergoing a transaction that affects, or may affect, how corporate control*, structure or governance occurs at the accredited or candidate institution (hereinafter the “member institution”). Approval of the transaction resulting in the Change of Control, Structure or Organization shall be necessary prior to its consummation to effectuate the continued accreditation of the institution subsequent to the closing of the proposed transaction.

*Control shall be understood to mean the possession, direct or indirect, of the power to direct or cause the direction of, the management and policies of an institution, corporation, partnership or other entity, whether through the ownership of voting securities, by contract or otherwise. (See related definition at 34 CFR § 600.31(b).)

Eligibility for Change of Control

No institution shall be deemed eligible for Change of Control, Structure or Organization merely by virtue of having accredited or candidate status with HLC. Approval shall be at the sole discretion of HLC’s Board of Trustees (“the Board” or “HLC’s Board”). An institution shall apply for HLC approval of a proposed Change of Control, Structure or Organization transaction through processes outlined in this policy and must demonstrate to the satisfaction of HLC’s Board that the transaction and the member institution that will result from the transaction meet the requirements identified in this policy and that approval of the proposed Change of Control, Structure or Organization is in the best interest of HLC.

In those cases in which HLC’s Board decides to approve a proposed Change of Control, Structure or Organization, it may decide so subject to conditions on the institution or its accreditation. In those cases in which HLC’s Board decides, in its sole discretion, that the proposed transaction builds a new institution bypassing the Eligibility Process and initial status review by means of a comprehensive evaluation, HLC Board shall not approve the Change of Control, Structure or Organization.

The Board will not consider for approval any proposed Change of Control, Structure or Organization involving an institution that is under a sanction, Show-Cause Order or adverse action from any other recognized accreditor or loss of authorization from any state entity or is under investigation by any state entity, or involving a buyer or investor who owns such an institution except as described in this policy. The Board will also not consider for approval any proposed Change of Control, Structure or Organization for an institution the Board has determined within the previous twelve months to merit withdrawal of accreditation, even if a formal action to withdraw accreditation has not yet taken place

The Board will consider a Change of Control, Structure or Organization for a member institution on sanction or under a Show-Cause Order only if there is substantial evidence that the proposed transaction resolves the issues the institution must address during the sanction or Show-Cause period and the transaction otherwise meets each of the Key Factors identified in this policy.

Types of Transactions

The transactions that require prior HLC approval¹ include, but are not limited to, the following:

1. Sale or transfer to, or acquisition by, a new owner of all, or a substantial portion, of the institution’s assets, or the assets of a branch campus or site (not including any transfer that constitutes only the granting of a security interest);
2. Merger or consolidation of an institution with one or more institutions or entities. This includes the consolidation of an institution not accredited or in candidate status with HLC into the structure of an institution holding status with HLC;
3. The division of the member institution into one or more institutions or entities;
4. Stock transactions including Initial Public Offerings of stock as well as those transactions wherein an individual, entity or group² acquires and controls 25% of the total outstanding shares of stock of the member institution, or an individual, entity or group increases or decreases its control of shares to greater or less than 25%, through individual or cumulative transactions, of the total outstanding shares of the stock of the institution;
5. Change of corporate form, governance structure, or conversion, including, but not limited to, change from Limited Partnership to Corporation, from Limited Liability Corporation to a Corporation, from a Not-for Profit Corporation to a For-Profit Corporation, a Private to Public, a Not-for Profit Corporation controlled by members to one controlled by its Board of Directors, significant change in the size of the institution’s governing board;
6. Any of the transactions in items 1 through 5 above involving a parent corporation that owns or controls the member institution or in any intermediate subsidiary of a parent corporation where that subsidiary has a controlling relationship to the institution and where the transaction may reasonably affect the control of the accredited institution as determined by HLC or by the U.S. Department of Education;
7. Sale, transfer, or release of an interest in the member institution such that there is change in the management or governance of the institution; and
8. Transfer of substantial academic or operational control of the member institution to a third-party entity.

Change of Control, Structure, or Organization Without Prior HLC Approval

Should an institution undertake a Change of Control transaction without prior approval, HLC’s President shall have the authority to take a recommendation to the appropriate HLC decision-making body to require regular monitoring, a sanction, a Show-Cause Order or withdrawal of accreditation for an institution, subject to HLC policy and procedures related to those actions.

Prior to any decision-making body’s review, the institution will be informed about the President’s recommendation and will have at least 14 days to prepare and submit a response that the Board or Institutional Actions Council, as applicable, will have available when it considers the President’s recommendation. The Board has the authority to withdraw the accreditation or candidacy of an institution that completes a Change of Control, Structure or Organization without receiving prior HLC approval, when required, from the Board of Trustees.

Notification to HLC Regarding Other Transactions

A member institution must notify HLC staff of any other Change of Control, Structure or Organization that is not separately identified in this policy or that may be separately identified in the policy but may not be reasonably known by, or under the control of, the accredited institution, a parent entity or intermediate subsidiary prior to the transaction (e.g., disposal of stock by an investor). These changes include, but are not limited to, changes in the Chief Executive Officer of the member institution, changes in the structure and composition of the Board of Trustees of the institution, other than those due to normal or mid-term completion of Board members’ terms or removal or replacement of Board members or revision of corporate bylaws through regular review processes, and sale or transfer of a block of stock that constitutes less than 25% but more than 10% of the total outstanding voting shares of the member institution, its corporate parent or other entity in a controlling relationship with the institution. These changes must be reported to HLC as soon as they are reasonably known to the institution. While such changes are to be reported for information, staff may determine in certain cases that they do constitute a Transaction that must be approved under this policy or that require HLC follow-up under HLC policies related to monitoring.

¹ Such transactions may or may not also require approval from the U.S. Department of Education.

² For a definition of a "group" see Section 13(d)(3) of the Securities and Exchange Act of 1934.

Policy History

Last Revised: November 2022
First Adopted: June 2009 and February 2010
Revision History: February 2010, June 2019, June 2020, November 2020, February 2022, November 2022
Notes: Policies combined November 2012 – 3.3, 3.3(a), 3.3(b), 3.3(e), 3.3(f). In February 2021, references to the Higher Learning Commission as “the Commission” were replaced with the term “HLC.”