It also failed a special standard which included minimum requirements for children's health, safety and wellbeing.
Mash managing director Craig Fortune said the business would be undergoing major reform in the coming months.
Following the string of allegations levied against Magic Kids, Fortune approached former owner Jeremy Botting because he "saw a space we could make a difference".
Regardless of whether the allegations were true, parents needed to know their children were being looked after, Fortune said.
"When we work with children we have an obligation."
While expanding the business had played a factor, the driving force was to make sure Dunedin parents had a place they could comfortably rely on for their childcare, he said.
Mash had been working with Te Kahui Kahu, and so far, feedback had been "really positive".
There was a "robust plan" in place, he said.
While change could not happen overnight, parents could be reassured it was coming.
The business would be acting under a new governing body, with the addition of site managers and a regional manager.
Former Magic Kids Club owner Botting said he felt the business was in good shape to pass on to the new owner.
In August, he was given positive feedback about the progress the business had made in regards to the upcoming October assessment.
He "felt it was time to pursue other opportunities".
All staff had been retained in the transfer, he said.
Te Kahui Kahu social services accreditation general manager Barry Fisk said it would meet the new owners to ensure they were aware of the accreditation standards and what improvements were required in time for the next review in October.
It was satisfied the current owners were taking appropriate steps towards meeting accreditation standards.
"We look forward to working with the new owners to ensure progress continues."
