United States Nuclear Regulatory Commission - Protecting People and the Environment

Information Notice No. 89-25: Unauthorized Transfer of Ownership or Control of Licensed Activities

                                  UNITED STATES
                          NUCLEAR REGULATORY COMMISSION
                OFFICE OF NUCLEAR MATERIAL SAFETY AND SAFEGUARDS
                             WASHINGTON, D.C.  20555

                                  March 7, 1989


Information Notice No. 89-25:  UNAUTHORIZED TRANSFER OF OWNERSHIP OR 
                                   CONTROL OF LICENSED ACTIVITIES

Addressees:

All U.S. Nuclear Regulatory Commission (NRC) source, byproduct, and special 
nuclear material licensees.

Purpose:

This notice is to inform licensees of their responsibility to provide timely 
notification to NRC before the planned transfer of ownership or control of 
licensed activities, and to obtain prior written consent to such action from 
NRC, as specified in 10 CFR Sections 30.34(b), 40.46, and 70.36.  In addition, 
this notice provides guidance on the type of information that should be sub-
mitted to NRC, before a change of ownership or control.  It is expected that 
recipients will:  review this notice for applicability to their licensed acti-
vities; distribute it to responsible licensee management and corporate staff, 
radiation protection staff, and authorized users, as appropriate; and maintain 
procedures to preclude problems from occurring as the result of the transfer 
of control of licensed activities.  However, suggestions contained in this 
notice do not constitute any new NRC requirements, and no written response 
is required.

Discussion:

Sections 81 and 184 of the Atomic Energy Act of 1954, as amended, require 
that a license be possessed to conduct licensed activities, and 10 CFR Section 
30.34(b) states that no NRC license nor any right under a license shall be 
transferred, assigned or in any manner disposed of, either voluntarily or 
involuntarily, directly or indirectly, through transfer of control of any 
license to any person, unless the Commission shall, after securing full in-
formation, find that the transfer is in accordance with the provisions of 
the Act and shall give its consent in writing.  Similar wording is found in
Sections 40.46 and 70.36 of the regulations for source and special nuclear 
material. 

Recently, NRC has noticed an increasing trend to transfer ownership of 
businesses that control the use of licensed materials.  Such changes in 
ownership are usually the results of mergers, buy-outs, or majority stock 
transfers.  These actions appear to be occurring at a greater frequency 
because of the present economic environment.  Although it is not the intent 




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                                                            March 7, 1989
                                                            Page 2 of 4 


of NRC to interfere with the business decisions of licensees, it is necessary 
for licensees to provide timely notification to NRC whenever such decisions 
could involve changes in the corporate structure responsible for management 
oversight, control, or radiological safety of licensed materials.  The purpose 
of such notification is to allow NRC to assure that:  radioactive materials 
are possessed, used, owned, or controlled only by persons who have valid NRC 
licenses; materials are properly handled and secured; persons using such mate-
rials are capable, competent, and committed to implement appropriate 
radiological controls; and public health and safety are not compromised by the 
use of such materials.

In 1988, NRC identified several instances of businesses authorized to possess 
and use licensed materials that were transferred to other owners, with a 
consequent change in control, without any notification to the NRC.  In such 
cases, NRC has usually become aware of the change either when conducting a 
routine inspection or when notified by the new controlling organization 
(transferee).

Transfer of company ownership often results in the assumption of licensed 
activities by a corporation not authorized to use or possess licensed 
materials, and whose competence and ability to establish, implement, and 
maintain radiological controls have not been previously evaluated by NRC.  
In such cases, NRC usually determines that the transferee violated NRC 
requirements on use and possession of radioactive materials (because of 
its unauthorized use and possession), and that the predecessor entity 
(transferor) failed to inform NRC of the planned transfer of ownership.  

In specific cases, licensees have failed to inform NRC of changes in ownership
and changes in locations of licensed material from those specified on the 
transferor's licenses.  In one particular case, failure to notify NRC of 
a change in ownership may have contributed to the inadvertent loss of two 
nuclear weighing scales, containing several hundred millicuries of cesium-137. 
This type of situation could result in the exposure or contamination of 
individuals or the environment.  

NRC licensees planning to transfer ownership, a change in corporate status, 
or control of licensed activities are required by 10 CFR to provide sufficient
prior notice and full information about the change to NRC, in order to obtain 
written consent from the Commission before the transfer.  Although the burden 
of adhering to this requirement is on the existing licensee, it will be neces-
sary for the transferee to provide supporting information or to independently 
coordinate the change in ownership or control with the appropriate NRC 
Regional Office.  Failure to comply with this requirement may adversely affect 
the public health and safety and interfere with NRC's ability to inspect 
activities.  There-fore, NRC may consider that a violation of this requirement 
warrants escalated enforcement action, including civil penalties and orders, 
if indicated by the circumstances against one or both of the parties involved.  
Willful failure to obtain prior NRC approval of the transfer may result in 
referrals to the Department of Justice for consideration of criminal 
prosecution. 
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                                                            March 7, 1989
                                                            Page 3 of 4


The following guidance is provided concerning notification of NRC of ownership 
or control changes:

     1.   Full information on change in ownership or control of licensed 
          activities should be submitted to the appropriate NRC Regional 
          Office as early as possible, preferably at least 90 days before 
          the proposed action.

     2.   NRC approvals for change in ownership or control may be delayed or 
          denied if the following information, where relevant, is not included 
          in the submittal:
          
          a.   The name of the organization, if changed.  Provide the new 
               name of the licensed organization and if there is no change, 
               so state. 
               
          b.   Identification of any changes in personnel named in the license,
               including any required information on personnel qualifications.

          c.   An indication of whether the seller will remain in business 
               without the license.

          d.   A complete, clear description of the transaction.  The de-
               scription should include any transfer of stocks or assets.

          e.   An indication of any planned changes in organization, location, 
               facilities, equipment, procedures, or personnel.  If such 
               changes are to be made, they should be fully described.

          f.   An indication of any changes in the use, possession, or storage 
               of the licensed materials.  If such changes are to be made, 
               they should be described.

          g.   An indication of whether all surveillance items and records, 
               including radioactive material inventory and accountability 
               requirements, will be current at the time of transfer.  A 
               description of the status of all surveillance requirements 
               and records, e.g., calibrations, leak tests, surveys, etc. 
               should be provided.  

          h.   A description of the status of the facility.  Specifically, the 
               presence or absence of contamination should be documented.  If 
               contamination is present, will decontamination occur before 
               transfer?  If not, does the successor company agree to assume 
               full liability for the decontamination of the facility or site? 

          i.   A description of any decontamination plans, including financial 
               assurance arrangements of the transferee, should be provided, 
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                                                            March 7, 1989
                                                            Page 4 of 4 


               as specified in 10 CFR Sections 30.35, 40.36, and 70.25.  
               This should include information about how the transferee 
               and transferor propose to divide the transferor's assets, 
               and responsibility for any cleanup needed at the time of 
               transfer. 
               
          j.   An indication of whether the transferor and transferee agree 
               to the change in ownership or control of the licensed material 
               and activity.  If so, documentation stating this should be 
               provided.

          k.   A commitment by the transferee to abide by all constraints, 
               conditions, requirements, representations, and commitments 
               identified in the existing license.  If not, the transferee 
               must provide a description of its program to assure compliance 
               with the license and regulations.

No specific action or written response is required by this information notice. 
Questions on this matter should be directed to the appropriate NRC Regional 
Office or to this office.




                                        Richard E. Cunningham, Director
                                        Division of Industrial and
                                          Medical Nuclear Safety
                                        Office of Nuclear Material
                                          Safety and Safeguards


Technical Contact:  Scott Moore, NMSS
                    (301) 492-0514

Attachments:  1. List of Recently Issued NMSS Information Notices
              2. List of Recently Issued NRC Information Notices

.                                                            Attachment 2 
                                                            IN 89-25
                                                            March 7, 1989
                                                            Page 1 of 1

                             LIST OF RECENTLY ISSUED
                             NRC INFORMATION NOTICES
_____________________________________________________________________________
Information                                  Date of 
Notice No._____Subject_______________________Issuance_______Issued to________

89-24          Nuclear Criticality Safety    3/6/89         All fuel cycle
                                                            licensees and other
                                                            licensees 
                                                            possessing more 
                                                            than critical 
                                                            mass quantities of
                                                            special nuclear 
                                                            material.

89-23          Environmental Qualification   3/3/89         All holders of OLs
               of Litton-Veam CIR Series                    or CPs for nuclear
               Electrical Connectors                        power reactors.

89-22          Questionable Certification    3/3/89         All holders of OLs
               of Fasteners                                 or CPs for nuclear
                                                            power reactors.

89-21          Changes in Performance        2/27/89        All holders of OLs
               Characteristics of Molded-                   or CPs for nuclear
               Case Circuit Breakers                        power reactors.

88-73,         Direction-Dependent Leak      2/27/89        All holders of OLs
Supplement 1   Characteristics of Contain-                  or CPs for nuclear
               ment Purge Valves                            power reactors.

89-20          Weld Failures in a Pump       2/24/89        All holders of OLs
               of Byron-Jackson Design                      or CPs for nuclear
                                                            power reactors.

89-19          Health Physics Network        2/23/89        All holders of OLs
                                                            or CPs for nuclear
                                                            power reactors, and
                                                            the following fuel
                                                            facilities:  
                                                            Nuclear Fuel 
                                                            Services of Erwin, 
                                                            General Atomic, UNC
                                                            Montville, B&W LRC
                                                            Lynchburg, and B&W
                                                            Lynchburg.

89-18          Criminal Prosecution of       2/22/89        All holders of OLs
               Wrongdoing Committed by                      or CPs for nuclear
               Suppliers of Nuclear                         power reactors.
               Products or Services
__________________________________________________________________________________
OL = Operating License
CP = Construction Permit 
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