Skip to main content
Date
Rule
801.11(e)
Staff
Michael Verne
Response/Comments
If the operating entity has a regularly prepared balance sheet, as your description implies, then 801.11(e) is not available to New LLC. See last sentence of first paragraph of Analysis in Interpretation #147 in the Third Edition of the PNPM.

Question

From:(redacted)

Sent:Thursday, May 18, 2006 3:06 PM

To:Verne, S. Michael

Subject: 801.11(e) question

HiMike. I left a vm message for you, but thought email might be more expeditious.

New LLC is being formed byseveral entities, none of which will receive a controlling interest. Oneparticipant is contributing a wholly-owned LLC ("LLC2") that owns (1)an operating, but not yet revenue generating, entity; (2) a minority interestin another LLC; and (3) a shell company that holds a contract to purchase 100%of the membership interests of yet another LLC ("LLC3") forconsideration in excess of $56.7 million. All other participants arecontributing cash that will be used to purchase LLC3.

Iunderstand that the formation of the New LLC is not reportable, as no personwill hold an interest of 50% or more. New LLC will be its own UPE. My questionrelates to analysis of the subsequent acquisition (to occur soon afterformation) of LLC3 by an entity within New LLC. At the time of thisacquisition, neither New LLC nor LLC2 will have a regularly prepared balancesheet. The operating entity beneath LLC2 does have a regularly prepared balancesheet. Please confirm that 801.11(e) applies such that the total assets of NewLLC (the acquiring person in the acquisition of LLC3) are its assets (includingcash contributed upon formation, total assets as reflected on the operatingentity's balance sheet and the value of the minority LLC interest owned byLLC2) less cash to be used to acquire LLC3.

Thank you.

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

Learn more about Informal Interpretations.