Does a client have the 'right' to know that their hosting company has been sold

[whmcsguru]

A situation has come up over the past week or so, and I'm just curious, from the client perspective, does the client have the right to know if their hosting company has been sold?

The situation:
A rather large hosting company had it's assets transferred in early February (likely was sold much sooner). Up until the first week of March, it was kept hush hush. The only way that individuals found out was because of some savvy internet individuals leaking rumors of this on LET and WHT.

To date, company has not sent an email out to clients. They DID (on the 11th) notify them via a bulletin in the client area, however, the opinion seems to be that few login to that area frequently, if at all.

Is it just me that sees this as wrong? Do I, as a client, have the right to know if the company I've been hosting my servers through has been sold? What say you?

 

[SenseiSteve]

Good question as there's a contract in place between the provider and its clients. Not a lawyer, but I would think clients should have a right to know.

 

[easyhostmedia]

Yes clients should be told if you sell to another company, but the main issue is when do you tell them, if you tell them too early they all may leave, so making your business less interesting to buyers as you have no clients

 

[SynTax]

Yes, of course, you have the right to know this. You can even start a legal process on this issue because you have not yet chosen to work with the people who bought the company sold and they do this without your knowledge. 3rd parties receive your personal data and you are unaware of it.

 

[HostOX]

Depends on their legal documents and from a legal view I would probably say no.

However it is nice to inform people, but in this businesses it is best to ease it in slowly and make it look like new management as it can and does cause huge losses of clients and so you can understand why it isn't instantly broadcast.

 

[easyhostmedia]

Yes, of course, you have the right to know this. You can even start a legal process on this issue because you have not yet chosen to work with the people who bought the company sold and they do this without your knowledge. 3rd parties receive your personal data and you are unaware of it.

You cannot start a legal process because a company has been bought out/sold on. In regards to your data, then you don't have any comeback as it's just like the company employing new staff who will have access to your data, your data is still held and being used by the same company you, they just have a new Boss/CEO and at most will just rebrand.

I once took over another hosting business where the clients (only 10 when he actually told me there were 50 clients) were not told, but I was told by the sellers that 4 of these were his friends and were not paying him to host, 3 were family and were not paying for hosting and 3 were on annual plans and had just paid him. So in effect, I would make no money from these clients. My first job was to introduce myself as their new host (they were all shocked they had a new host). I Also informed these that I was not going to be able to give them free hosting, so they would need to upgrade to one of my paid plans within 7 days. and those on annual plans I informed them as I never received their money I won't be hosting them free for 12 mths, so I will give them 3 mths before they will need to pay. out of the 10 clients, only 1 remained with all the rest choosing to leave. i dod get my money back through Paypal as I was missold it stating it had 50 clients.

 

[whmcsguru]

Depends on their legal documents

No amount of legal documents can take away someone's rights. When we're talking something like hosting, it's important to understand that a change in ownership can and usually does reflect a change in TOS/AUP, as the absorbed company (they won't ever be two separate companies, no matter how the new one tries to spin it) is taken over and new terms apply

For this reason alone, the customer has a right to know what's going on here.

I'm not talking about 'considering to purchase'. Nah. I'm talking about actually purchasing, having the sale concluded, and new company has all the assets in hand at this point.

 

[John @ S4]

Legally, I'd say it's a grey area, and in most cases clients do not need to be informed if the ownership of a company changes.

But ethically and from a good customer relations point of view it's a completely different thing, and of course all clients should be notified both pre sale and post sale, whether the change actually has any impact on the services they receive, pricing, TOS, or not.

 

[SynTax]

You cannot start a legal process because a company has been bought out/sold on. In regards to your data, then you don't have any comeback as it's just like the company employing new staff who will have access to your data, your data is still held and being used by the same company you, they just have a new Boss/CEO and at most will just rebrand.

I once took over another hosting business where the clients (only 10 when he actually told me there were 50 clients) were not told, but I was told by the sellers that 4 of these were his friends and were not paying him to host, 3 were family and were not paying for hosting and 3 were on annual plans and had just paid him. So in effect, I would make no money from these clients. My first job was to introduce myself as their new host (they were all shocked they had a new host). I Also informed these that I was not going to be able to give them free hosting, so they would need to upgrade to one of my paid plans within 7 days. and those on annual plans I informed them as I never received their money I won't be hosting them free for 12 mths, so I will give them 3 mths before they will need to pay. out of the 10 clients, only 1 remained with all the rest choosing to leave. i dod get my money back through Paypal as I was missold it stating it had 50 clients.

I disagree with you, because as you mentioned, they have to notify their customers even if the owner only changes, and in this case the customers should decide whether to work with the new owner.

 

[easyhostmedia]

I disagree with you, because as you mentioned, they have to notify their customers even if the owner only changes, and in this case the customers should decide whether to work with the new owner

It's just like a company getting a new boss, they don't need to tell any customers. No legal obligations to tell any customers. I could take over a company tomorrow, the company could have the same address, same staff, same phone number, same bank account, the same web address, and name, and none of its customers legally need to be told as the only change is the parent company as the business is still the same as before. Ethically it is just right all customers (your customers and other companies' customers) are told, but nothing legally says you have to tell them.
Don't forget you could upset some of your own customers by acquiring other companies as you may have customers who like you being a small company that gives the personal touch, but by acquiring new companies they may fear losing the personal touch.

 

[bigredseo]

Legality will depend on the state and country where the business is being sold, and the location of who is purchasing the business/company.

If you are a public company with share holders, they have certain rights too. Not just publicly traded companies, but any company that has a share holder. If you are selling assets and not the stock of your corporation, then major share holders would have a vote. Minor share holders may not necessarily have a vote, but are entitled to know the value of the sale so they can sell stock at the close of the transaction.

As far as customers are concerned, I couldn't find anything that specifically talked about the legality of informing a customer, but found plenty of places that talked about the benefits of informing them, and doing so before the general public informs themselves.

When it comes to when to inform someone, it's usually done after the signing (so much can go wrong before the actual sale/closing). Most places are proud to announce the acquisition or purchase and then a fanfair about "under new management" etc and the benefits that it will bring to their client base.

But as far as legalities of requirements. I couldn't find anything specific.

 

[easyhostmedia]

Legally, I'd say it's a grey area, and in most cases clients do not need to be informed if the ownership of a company changes.

But ethically and from a good customer relations point of view it's a completely different thing, and of course all clients should be notified both pre sale and post sale, whether the change actually has any impact on the services they receive, pricing, TOS, or not.

every country has different business laws, so it all depends on the country your business is based in, but in the UK you can change business ownership, and the only people that need to legally know this is HMRC for tax purposes.
But ethically you should keep all clients in the loop of any changes that could affect them. If you acquire another business then yes the business may just run as it always has with the same staff, but 9/10 you will implement your own TOS/agreements/policies into the newly acquired business, so clients will need to be given a copy of these with the option to accept or decline these at least 14 days before they are fully implemented which is a legal requirement.

 

[SGraf]

The argument for right to know is pretty clear cut.

If a hosting comany gets sold, the client's details in its databases are now transferred/given/handed over to a third party. Therefore notifying the clients would defiantly be the way to go.

 

[easyhostmedia]

The argument for right to know is pretty clear cut.

If a hosting comany gets sold, the client's details in its databases are now transferred/given/handed over to a third party. Therefore notifying the clients would defiantly be the way to go.

If a company is only being acquired by another company and will still trade as an independent company under the same name with the same staff, same bank account etc. then clients don't legally need to be informed as nothing is changing apart from the parent company name. Ethically it would be nice to inform clients that *** has acquired your business, but this will not affect them or their hosting.

 

[SGraf]

If a company is only being acquired by another company and will still trade as an independent company under the same name with the same staff, same bank account etc. then clients don't legally need to be informed as nothing is changing apart from the parent company name. Ethically it would be nice to inform clients that *** has acquired your business, but this will not affect them or their hosting.

Please note that i said it is the way to go. Not that it is legally mandated.

That being said, i agree on the point of view that if the business entity is being kept exactly as is then there is room to do without.

However in terms of privacy regulations and customer service/friendliness,.... by now the best way forward (hence my response) is to go with disclosure. This also helps remove a lot of the headaches associated with privacy regulations (https://www.lexisnexis.co.uk/legal/guidance/the-impact-of-the-gdpr-on-m-a-transactions)

 

[easyhostmedia]

Please note that i said it is the way to go. Not that it is legally mandated.

That being said, i agree on the point of view that if the business entity is being kept exactly as is then there is room to do without.

However in terms of privacy regulations and customer service/friendliness,.... by now the best way forward (hence my response) is to go with disclosure. This also helps remove a lot of the headaches associated with privacy regulations (https://www.lexisnexis.co.uk/legal/guidance/the-impact-of-the-gdpr-on-m-a-transactions)

The GDPR would only come into play if the company was to change its policies, but if your business is registered with the ICO (in the UK) or similar within the EU and this does not change then clients don't need to know.
Basically, when a company is acquired apart from the change of parent company (as most times staff, premises etc. remain the same), the only change clients may see is their statements show the parent company name. Eventually, the policies and TOS may be merged into one, but as most companies will have a tick box for clients to tick when they make monthly payments asking them to agree to TOS this forms a new contract even if they read the tos,
But even so, all you need to do is at least 14 days before you adopt the policies is notify clients that on ** day policies will change to <include a copy> asking clients to accept or reject these changes.

 

[SGraf]

The GDPR would only come into play if the company was to change its policies, but if your business is registered with the ICO (in the UK) or similar within the EU and this does not change then clients don't need to know.
Basically, when a company is acquired apart from the change of parent company (as most times staff, premises etc. remain the same), the only change clients may see is their statements show the parent company name. Eventually, the policies and TOS may be merged into one, but as most companies will have a tick box for clients to tick when they make monthly payments asking them to agree to TOS this forms a new contract even if they read the tos,
But even so, all you need to do is at least 14 days before you adopt the policies is notify clients that on ** day policies will change to <include a copy> asking clients to accept or reject these changes.

Honestly i don't get why you are trying to infer that i disagree with you.

Me:

That being said, i agree on the point of view that....

...is being kept exactly as is ...

And i think we both can agree on the view that if things are kept the same....

So now that that is out of the way and that we have the point of things staying "independant/as-is" out of the way.

databases are now transferred/given/handed over to a third party.

Data Transfer to Third parties/institions is one of the case that ..once again... may lead to a disclosure responsibility.

On Mergers/Acquisition it is more likely than not that changes to the structure or the way the service is provided are going to happen. In that case it may be mandatory - As both of us presumably agree as you took time to expand on my point about that (with regard to how to implement it).


(according various online dictionaries: may = expressing possibility)

 

[easyhostmedia]

Honestly i don't get why you are trying to infer that i disagree with you.

Me:



And i think we both can agree on the view that if things are kept the same....

So now that that is out of the way and that we have the point of things staying "independant/as-is" out of the way.

Data Transfer to Third parties/institions is one of the case that ..once again... may lead to a disclosure responsibility.

On Mergers/Acquisition it is more likely than not that changes to the structure or the way the service is provided are going to happen. In that case it may be mandatory - As both of us presumably agree as you took time to expand on my point about that (with regard to how to implement it).


(according various online dictionaries: may = expressing possibility)

It all depends on how the business is taken over.
Structures may never change as you may take over a business that already has full staff for sales and support etc. and is running on its own server, so no need to change anything structurally or even policy-wise if you want that business to remain separate from your business.
If on the other hand, you take over a business and then move the clients, onto your own server/into your own management system, then yes these clients should be 100% informed as they are now clients of a different company.

 

[systemfreaks]

I think clients should be informed, or at least get introduced into the new management, this might make them leave or feel better cared for, in my experience transparency is the best way to go always when it comes to bussiness

 

[easyhostmedia]

I think clients should be informed, or at least get introduced into the new management, this might make them leave or feel better cared for, in my experience transparency is the best way to go always when it comes to bussiness

Yes, but this could be just a simple newsletter to all clients of both companies explaining the acquisition and any changes if any are to be made. Ethically it is the way to go.