The 'Hotel California' Moment for Transferring Representatives


Authorised representatives wanting to leave their current AFS licensee to join another dealer group should remember the words of The Eagles 1977 hit song ‘Hotel California’ - “You can check out any time you like, But you can never leave!”

There are numerous ways that an AFS licensee can prevent or hinder an authorised rep from leaving the licensed group.  

The ultimate leverage the old licensee has is the refusal to transfer the clients to the new licensee.

Meanwhile the notice period under the termination notice given to the old licensee by the AR is ticking down and the parties know that if it isn’t resolved by the termination date then the AR will have no licensee and be effectively prevented from servicing their clients.

So what do some licensees do to make life difficult for the outgoing AR?

The Transfer Deed

Licensees regularly want the outgoing AR and their new licensee to sign a transfer deed with the old licensee.  The terms of that deed often contain clauses that are detrimental to the AR and or the new licensee and they may not want to sign. ‘No transfer deed, no transfer’ says the old licensee.

Copies of files

Licensees often won’t agree to an accessibility agreement in respect of files.  They want all the files.  That means that the AR has to make copies – no problem if they’re fully electronic but possibly a huge problem if they’re not.

Let’s have an audit

The outgoing licensee might ask to audit, say, ALL YOUR FILES!

The client advice letter

The AR agreement might require that the outgoing licensee have input into the letter advising the clients of the move and the right for those clients to stay with the outgoing licensee.  The licensee will say they can’t transfer until all the clients have had time to make a decision and advise the licensee. 

Confidential information

The AR agreement includes the clients’ information and files in the definition of confidential information and the clause then says that the AR can’t use that ‘confidential information’ for its own purposes but only for the benefit of the licensee.  Guess what – you just lost your client base.


In extreme cases the licensee might even say they won’t transfer clients without the approval of each and every client – ‘breach of privacy, y’know’.

In closing

It is important to realise that to combat these actions by the outgoing licensee the AR needs to address the issue at the time they are appointed rather than when they’re trying to leave.  

The AR agreement needs to include a transfer protocol and terms of the transfer agreement that are fair to both sides and that ensure an efficient and timely process.

In choosing an AFS licensee an AR should discuss more than simply the charges the new licensee will make.  The licensee’s requirements on departure would be one of those additional discussions.

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222 or email to see how we can assist.