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Nominal Changes

A change in ownership is nominal if the prior owner(s) continues to own one half or greater interest after the change in ownership. A nominal change in ownership does not require an examination of potential changes in employees or operations. (Learn more about When Less Than The Entire Risk Is Sold.) Transfers of ownership between members of an immediate family (father, mother, husband, wife, son, daughter, stepson, stepdaughter, grandson, or granddaughter) are considered nominal. In the event of a nominal change in ownership, the historical payroll and loss experience stays with the entity.

Nominal Change in Ownership Examples

Oscar's Oysters Incorporated is owned by Oscar (75%) and Edna (25%). Edna sells her 25% to Lily. Since Oscar had a 50% or greater interest both before and after the sale, the change in ownership is considered nominal and Oscar's Oysters Incorporated will retain all of its historical payroll and loss experience.


Gilbert and Gracie each own 50% of a racetrack. They sell the racetrack, and Gilbert buys a farm, and Gracie buys a motel. The historical payroll and loss experience from the racetrack will follow Gilbert and will be applied to his farm. Similarly, the same historical payroll and loss experience will follow Gracie and apply to her motel. Since they each owned a one-half or greater interest in both the old entity and their respective new entities, they will retain all their historical payroll and loss experience.

Nominal changes in ownership frequently have an impact on whether or not entities are combinable for experience rating purposes. When a nominal change results in two or more previously combinable entities no longer being combinable, the entire experience developed by the risk is duplicated and used in the experience modifications for each of the separate entities after the change. See California Workers' Compensation Experience Rating Plan - 1995, Section IV, Rule 2, Paragraph 5.

Impact on Risk Example

Tom and Jerry each own 50% of Tom's Hardware, Inc. and Jerry's Hardware, Inc. Tom sells his share of Jerry's Hardware, Inc. to Jerry and vice versa. Since the change in ownership was not in excess of 50%, it is nominal and no change in status analysis is necessary. However, after the ownership change, the two corporations no longer share in excess of 50% common ownership and are thus no longer combinable. In this case, all of the historical payroll and loss experience generated prior to the ownership change is applied to each of the entities.

In the example above, the nominal change in ownership resulted in the two entities being no longer combinable. As a result, all of the experience developed prior to the ownership change would be duplicated and associated with each of the entities.

Notifying the WCIRB

Insurers, agents and brokers can log into WCIRB Connect® and use the Ownership Information Submission tool to notify the WCIRB of a change in ownership. The WCIRB no longer accepts ownership information submitted using WCIRB Form 601, Notification of Change in Ownership and/or Combinability of Entities Form. Learn more about the Ownership Information Submission tool on WCIRB Connect.

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