Management Rights, Industry Publication
Being right and being smart can be two different things
Article by Frank Higginson
Current as at July 7, 2026
This article appeared in Resort News, May 2026
In any management rights sale process, there are a million and one items to keep track of, and often one of the most important falls off the radar: informing the body corporate about your plans.
This is traditionally left until you are unconditional with respect to matters within the buyer’s control, but it can (and should) sometimes happen much earlier in the sale process. But this article isn’t about that!
Everyone is familiar with the need to seek body corporate approval in the sale of a management rights business, but did you know there are also circumstances where you might need to seek consent to changes in directorships or shareholding?
We have had a few instances recently where clients have charged on with changes – usually in a family-style partnership arrangement, say where Mum and Dad resigned as directors and the kids came on, or a brother bought out a sister in the shareholding and so on – and where their body corporate was not informed of those changes.
A change in control or, say, the sale of 51% of the shareholding in the corporate holder of a management rights business can be regarded as a deemed assignment, possibly triggering body corporate approval requirements similar to a standard assignment.
Deemed assignments are not regulated by the BCCM Act but by the agreements themselves. Each management rights agreement can be different and there are no hard and fast rules, but if we were asked to guess, we would say that at least 80% of agreements have some form of deemed assignment provision.
The standard assignment process requires consent from the body corporate, which has the right to assess the proposed new contractor’s character, finances, capabilities and training. The same assessment rights more than likely apply with any deemed assignment too.
If control changes without consent of the body corporate and if there is a deemed assignment provision, then it is a breach of the management rights agreements to give effect to the changes in directorship or shareholding before that consent is sought.
Clearly, that is not somewhere anyone wants to go.
While a body corporate must act reasonably and not use any change of control provision as an opportunity to renegotiate terms (no matter how tempting that might be), it is always much better to bring the body corporate along the journey of change than seek forgiveness later.
The key takeaway is this: keep the body corporate informed about your plans.
If you’re considering any change in company ownership or control, seek legal advice before doing anything else.
Apart from the body corporate issues, any change in control has other implications, such as potentially being in breach of facilities with your bank as well as creating some different tax consequences from a Capital Gains Tax perspective when the whole business is ultimately sold.
Share sales or corporate restructures are seldom vanilla, with downstream consequences often a nasty and unexpected outcome.
Clear, early communication with your legal advisor and with the body corporate are necessary prerequisites for a smooth and painless sale or change in control.
Read more from industry experts in Resort News:
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