Rule 54 – Regulation of Minor League Franchises

Approval of Control Interest Transfers

  1. Lease – No MiL franchise shall be leased without approval of the MiL President and the Commissioner. No MiL franchise may pledge its franchise as security for indebtedness without approval of the MiL President and the Commissioner.
  2. Sale – No sale or transfer of any ownership rights in a MiL club shall occur without approval of the MiL President. The President shall determine of the transfer constitutes a Control Interest transfer, meaning the power or authority to substantially manage the policies of the club.
  3. Regulated Transactions – A minor league club must notify and fully disclose to the Commissioner, the MiL President, and the League President any Regulated Transaction. A Regulated Transaction includes: sales or transfers of equity interests; loan agreements; stadium leases; broadcasting rights sales; concessions contracts of 1+ years; naming rights agreements; and any contact of 5+ years. A material failure no to disclose may nullify the transaction and subject the club to fines.
  4. Control Interest Transfers – If the President determines that a Regulated Transaction is a Control Interest Transfer, the President shall notify the club and the league, and the club must provided the following information:
    1. If the transfer is a transfer of equity interest: a processing fee; proposed organizational structure; names and biographical information of proposed owners and executives; proposed three year budget; financial statements of all proposed 5+% interest owners, including other business ownership; financing of the transaction; and any other information requested by the President
    2. If the transfer is a non-equity interest, any information requested by the President
  5. Approval – the President shall review the information for approval. In determining whether to approve, the President shall be guided by the following principles: responsibility and accountability; no conflicts of interest; financial viability; subsidiary or family relationships; local ownership and management; absence of gambling interests.
  6. Gambling Association Prohibited – No owner, office, director, or employee of a minor league club may have more than a 1% ownership interest in any gambling enterprise, or any interest whatsoever in any gambling enterprise that allows sports betting.
  7. Non-Control Interest Regulated Transactions – If the President determined that the Regulated Transaction is not a Control Interest Transaction, the President may still request certain of the information described here.
  8. Authority of Commissioner – The MiL President shall confer with the Commissioner regarding the approval of Regulated Transactions. The Commissioner shall have the authority to disprove of a transaction previously approved by the President. The Commissioner must do so in writing within 60 days of approval for Control Interest transactions and within 30 days of for Non-Control Interest transactions

Monitoring Financial Viability

  1. Disclosures of Control Interest Transactions – Each MiL team must provide the MiL President with copies of Regulated Transactions having a potential duration of 1+ years, and all contracts related to the sale of equity interests.
  2. Disclosures of Ownership Interests – Each MiL team shall provide the Commissioner and the MiL president with the detailed financial information of all business owners.
  3. Financial Maintenance – Each MiL team shall provide the Commissioner and the MiL president with financials regarding the team’s equity to liabilities ratios. The team must carry a ratio of at least 55-45 or be subject to penalties.
  4. Financial Disclosures – The required annual financial disclosures to be audited at the Commissioner’s request include: ledgers, payroll registers, cash receipts, disbursement journals, tax returns, leases, debt agreements, payroll tax info, broadcast contracts, pension & profit sharing agreements, advertising agreements, asset records, barter arrangements, insurance contacts, concession agreements, naming right agreements, bank statements, accounts relievable registers, real estate tax info, stadium contracts, travel & entertainment expenses, ownership arrangements, board minutes, outside counsel legal status records, purchase and sale agreements, stadium suite contracts, parking contracts, expense reports, physical inventories, ticket manifests, and box office settlement sheets. Regardless of an audit request, all teams shall submit a standard financial report form to the Commissioner.
  5. Penalties for Non-Compliance – Failure to comply with Rule 54 may subject a team to fines up to $50,000. For repeated violations, the MiL President may order investment of ownership interests.