Rev. Ruling 54-527
Termination of Basic Permit due to Change in Ownership
Advice is requested whether a basic permit held by a corporation would automatically be terminated 30 days after a change in ownership of the controlling shares from an individual to a corporation even though the individual holds a majority of the outstanding stock in such corporation. Advice is also requested whether the provisions of Regulations No. 1 with respect to changes occurring in persons owning or controlling more than 10 percent of the voting stock of a corporation are applicable to small stock transfers, as from time to time they total 10 percent, or just to individual transactions involving 10 percent or more of the voting stock.
Section 4(g) of the Federal Alcohol Administration Act provides as follows:
A basic permit shall continue in effect until suspended, revoked, or annulled as provided herein, or voluntarily surrendered; except that (1) if leased, sold or otherwise voluntarily transferred, the permit shall be automatically terminated thereupon, and (2) if transferred by operation of law or if actual or legal control of the permittee is acquired, directly or indirectly, whether by stock-ownership or in any other manner, by any person, then such permit shall be automatically terminated at the expiration of thirty days thereafter: Provided, That if within such thirty-day period application for a new basic permit is made by the transferee or permittee, respectively, then the outstanding basic permit shall continue in effect until such application is finally acted on by the Administrator (now Secretary of the Treasury). (Parenthetical data added.)
Article II, Section 6, of Regulations No. 1 provides in part that if there is any change in the officers, directors, or persons owning or controlling more than 10 percent of the voting stock of a corporation, notification of such change must be made immediately.
The transfer of a controlling stock interest in a corporation holding a basic permit under the Federal Alcohol Administration Act from an individual to a corporation, in which the individual holds a majority of the outstanding stock, would constitute a change of legal control, within the meaning of section 4(g) of the Federal Alcohol Administration Act, resulting in the automatic termination of the permit. Similarly, if the majority stockholder of corporation loses his majority stock interest and all of the minority stockholders thereby acquire legal control, the basic permit of the corporation may automatically terminate.
Article II, section 6 of Regulations No. 1 would be applicable when accumulations of small stock transfers result in some new person holding 10 percent or more of the voting stock of the corporation, at which time a report should be made.
27 U.S.C. 204; (27 CFR 1.27)