The purchase of a ready-made AEMI/EMI-company is the strategic decision that payment and Fintech firms turn to when entering regulated markets quickly. Unlike trying to apply for an EMI license from the ground up, buying an already licensed entity can speed things up a lot. But these types of deals carry greater legal and regulatory exposure.
An acquired company should not operate without comprehensive legal due diligence to ensure it’s compliant, has sufficient operational viability and is acceptable to the relevant financial regulator.
Key Specifics of Acquiring a Ready-Made EMI/AEMI Entity
A ready-made EMI/AEMI company is an entity that has already been authorised by the relevant supervisory authority to issue electronic money and provide payment services. Such entities typically have limited or no operational history and are structured for transfer to a new owner. Important details regarding such acquisitions are:
- a transfer of ownership in a regulated financial institution;
- must notify or get approval from its regulators;
- continuation of the compliance obligation after acquisition;
- assumption of historical regulatory risk.
Contrary to standard corporate mergers and acquisitions, purchase of a licensed EMI/AEMI entity doesn’t receive regulatory approval (via review) by default. Supervising bodies still have the power of revisiting the institution’s suitability even after control shifts.
Key Challenges and Legal Risks in the Acquisition Process
Purchase of a ready-made EMI/AEMI-company poses special legal and supervisory issues. These risks often result from inadequate or incomplete disclosure, regulatory history or lack of alignment with current supervisory expectations. Common challenges include:
- undisclosed supervisory correspondence or supervisory findings;
- inadequacies regarding past compliance mechanisms;
- deficiencies in safeguarding or capital adequacy frameworks;
- a lack of compatibility between the owner’s business-strategy and permit.
Likewise, regulators may impose conditions or delays in approving ownership transfers. Late identification of such risks in the diligence process may lead to enforcement action in the post-acquisition phase; permit suspension; or enforced re-constitution.
Professional Advisors as a Control Mechanism of the Risk of Buyout
During the transaction of a pre-made EMI/AEMI-project, expert advisers have play an important role in avoiding legal and regulatory risks. Their participation means that this transaction is considered in addition to typical corporate paperwork. On the professional side, we usually look at:
- legal assessment for licensing status and regulatory letters;
- consultation of internal controls and compliance systems;
- assessment of capital, safeguarding and reporting norms;
- assessment of whether the licence aligns with the buyer’s business objectives.
Advisers also help structure the transaction as per the supervisory change-of-control guidance. A proactive approach significantly reduces approval risk and will preserve the buyer’s long-term regulatory posture.
Communicating With Supervising Bodies on Ownership Switch
A title change in an EMI/AEMI-licensed entity involves formal negotiation with a competent financial authority. Supervising bodies must be informed of holding qualifying acquisitions and will have to approve the acquisition prior to acceptance. Supervisory interaction typically involves next-described steps:
- change-of-control notification;
- identification of new owner and ownership structure;
- evaluation of the fitness and propriety of the prospective purchaser;
- submission of updated business/compliance strategy, as applicable;
- formal approval, conditional approval, or objection.
It’s the regulators’ concern about whether the new ownership structure keeps supervisory integrity and financial stability. Communications will be facilitated by professional advisors, which will facilitate that the announcements are complete, uniform and are located strategically.
Documents for Review and the Review Scope for Compliance
Legal due diligence process for any prepared EMI/AEMI-company is a systematic examination of corporate, supervisory and operational documentation. The point here is to ensure that the entity meets all relevant laws and norms and to identify any potential hidden liabilities. Some of the key documentation typically reviewed include:
- regulatory authorisation records and licence documentation;
- historical letters and records of regulatory proceedings;
- documentation of corporate governance and ownership;
- internal mechanisms and compliance policy;
- records of safeguarding and capital adequacy.
Due diligence includes more than simply reviewing documents; it needs the firm to be ready to operate. Buyers should evaluate whether the firm’s compliance framework can drive its intended business-model with no substantive restructuring.
Maintenance of Normative Provisions and Post-Acquisition Rules
Purchasing a pre-packaged EMI/AEMI-company doesn’t reset supervisory norms. From the acquisition date, the buyer is tasked with ensuring full-cycle compliance. Potential post-acquisition obligations include:
- applying revised compliance and risk policies;
- correlated operational processes with regulatory expectation;
- evidently, submitting revised business plans when needed;
- continued regulatory oversight and reporting.
Failure to ensure continuance with compliance can result in supervisory actions. Expert advisors support buyers to migrate from one compliance system to another, and to guarantee continuous supervisory compliance.
Practical Advice for International Payment Businesses
For foreign-based payment businesses that want to expand globally, acquiring a readily established EMI/AEMI-company may be an effective option if successful. But success does require strict legal and regulatory preparation. Some practical suggestions for them are:
- carrying out full legal and compliance due diligence;
- pre-verifying the acceptance by regulators of ownership transfer;
- consolidating acquisition approach with long-term licensing goals;
- bringing in qualified advisers during the transaction from inception to end.
To view this acquisition as a regulated transaction as opposed to a typical corporate acquisition will greatly reduce supervisory risk and support the stability in the post-acquisition period.
Review of the Supervisory History and Supervisory Risk Assessments
An essential part of obtaining a ready-made AEMI/EMI-company in the legal research process, is to delve into its regulatory record. Where a licence remains formally valid, historical encounters with supervision might expose deficiencies in compliance or unresolved regulatory issues and operational weaknesses when operating in relation to previous interactions with the supervision in the past are the same regulators that could impact over the coming months or years. Review of the supervisory history generally consists of:
- review of prior supervisory inspection procedures and findings from past supervisory examinations;
- evaluation of remedial measures that were necessary or previously taken;
- evaluation of actions that required or had previously required remedial action;
- review of correspondence with the financial regulator;
- recognition of any notices, any warnings or sanctions or compliance deadlines.
Regulators like to see that past regulation on supervisory issues will remain transparent especially when a new owner has changed ownership. Failure to identify or mention these matters will bring regulatory rejection with it. Professional advisors assist in evaluating risk exposure from supervision, and judging whether past problems can be handled successfully after the acquisition.
Alignment of the Acquired Licences with the Buyer’s Model of business
Beyond regulatory compliance, buyers also need to evaluate whether the range of the obtained AEMI/EMI-licence fits with their prospective business. It will require an alignment between licence permissions and operational plans, otherwise it becomes a major regulatory risk. Important alignment issues include:
- enabled payment and e-money services under the licence;
- geographical scope and passporting status;
- transaction volume limits and customer segmentation;
- assimilation for an acquiring or payment processing model.
Where the buyer’s business model is not authorised, licence variation, additional approvals and regulatory re-organisations may be needed in addition to licence modifications or operational re-arrangements. Professional guidance helps customers to make scope assessments of licences and when appropriate formulate regulatory amendments as needed for lawful, scalable licensing for the purpose of regulatory requirements.
Conclusion
Acquiring a ready-made EMI/AEMI company can provide faster market accesst, though this does not come without significant legal and compliance risk. Regulatory status does not excuse the level of adequate due diligence, nor does assure compatibility with a potential future enterprise.
A sound legal process, structured regulatory communication, expert advisory support to ensure strategic planning is properly aligned with regulatory requirements. For payment organizations going global, disciplined due diligence remains the foundation of both legally compliant and sustainable growth.
This article was written by Denys Chernyshov – CEO of a globally-recognized legal services company Eternity Law International.
