Question
From: (redacted)
Sent: Monday, September 14, 2009 3:57 PM
To: Verne, B. Michael
Subject: RE: UPEof a Trust
Hi Mike,
Thank you verymuch for your response. I hope you don't mind a few follow-up questions. I amtrying to figure out the ultimate parent entity of an operating company thatwould be the acquired entity in an asset acquisition. The chain ofownership/control is as follows:
-OPERATINGCOMPANY (which would be the acquired entity holding the assets being acquired)is controlled by HOLDING COMPANY.
-HOLDINGCOMPANY's outstanding voting securities are held as follows: 47% bynatural person Mr. A; 33% by natural person Mr. B; the remaining 20% by threeseparate trusts, all of whom have the same settlor (Mr. A) and the same co-trustees(Mr. B and another natural person, Mr. C).
-Allthree trusts are irrevocable trusts in which the settlor does NOT retain areversionary interest in the corpus, such that the trust itself would be deemedto hold the assets and voting securities constituting the corpus of thetrust per 801.1(c)(3). As such, no one natural person or trust holds 50% ormore of the outstanding voting securities of HOLDING COMPANY by itself.
-Eachof the trusts is set up identically, such that Mr. A (the settlor) is able toremove and replace the trustee. However, Mr. B (who is one of the co-trusteesof all three trusts), has the power to resign and name his successor. If Mr. Bdid resign and name his successor, Mr. A would have the ultimate power toremove and replace that successor trustee.
-Mr.A is the father of Mr. B; Mr. B is not a minor.
My questions areas follows:
1. With respect to the three trusts, would Mr. A bedeemed the UPE of each trust? Does the fact that Mr. B (as co-trustee) canresign as co-trustee and replace his successor (even if that appointment wouldstill be subject to Mr. A's ultimate power to remove and replace trustees)affect the UPE analysis?
2. Assuming that Mr. A is the UPE of the trust, Mr. Awould hold 47% of HOLDING COMPANY and would also be the UPE of the three trustswho, together, hold 20% of HOLDING COMPANY. Would you aggregate (i) the 47%that Mr. A holds with (ii) the 20% that is held by the trusts that Mr. Acontrols, such that Mr. A would be the UPE of the HOLDING COMPANY? Orinstead, since the trusts hold their own assets/securities per 801.1(c)(3)(even though they are controlled by Mr. A), would it be deemed that noperson holds more than 50% of the outstanding voting securities ofHOLDING COMPANY and that HOLDING COMPANY is the UPE of OPERATING COMPANY?
I very muchappreciate your guidance on this matter. If you require additional informationor if you would like to discuss this further, please do not hesitate to contactme at (redacted).