Skip to main content
Date
Rule
801.1(b)
Staff
Michael Verne
Response/Comments
Agree.

Question

From:(redacted)

Sent:Wednesday, December 20, 2006 3:17 PM

To:Verne, B. Michael

Subject:question

Hi,Mike -

I'mhoping to get your thoughts on this situation. Company A and Company B aremaking cash investments in Newco; Newco will acquire Company C in a transactionthat is reportable. Company A's contributions to Newco will result in it owningless than 50% of the voting securities of Newco, though Company B will owngreater than 50% of Newco.

Thereis a term sheet that states that Company A and Company B will each have twodirectors (of a four member board) of Newco prior to closing. From and afterclosing, an investor's agreement will be in place giving neither Company A norCompany B a present contractual right to appoint half or more of the directorsof Newco. Based on these facts, it appears that there are no reportingobligations of Company A because it holds less than 50% of the votingsecurities of Newco and although it controls Newco momentarily at the time ofclosing based on its right to appoint half of the directors, it is not crossinga notification threshold solely by virtue of its right to director appointment.Further, the right to director appointment changes upon closing.

Doyou agree?

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.