Question
October 13, 1992
VIA HAND DELIVERY
Victor L. Cohen, Esq.
Senior Staff Attorney
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Room 310
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Re: Application of the Premerger Notification Rules
to the Formation of Limited Liability Companies
Dear Victor:
Following up on our recent telephone conversation, I am writing to confirm my understanding of the Premerger Notification Offices treatment of limited liability companies, and the application of these views to a fact pattern which can be summarized as follows.
Persons A and B plan to form a limited liability company under Delaware or Maryland law. A and B satisfy the commerce criterion contained in 15 U.S.C. 18A(a)(1), each has annual net sales and total assets exceeding $100 million, and each plans to contribute more than $15 million of assets to the venture. In exchange, A will acquire about 65% - 75% of the new companys equity, and B will acquire about 25% - 35%. Finally, assume that no exemptions apply.
I understand that the FTC would require A and B to report such a transaction under the Hart-Scott-Rodino Act, because the Premerger Notification Office views limited liability companies as tantamount to corporations. More specifically, an equity interest in a limited liability company is considered a voting security under Rule 801.1(f), because that interest will usually (PNO staff note: may) entitle the holder to vote for individuals exercising functions similar to corporate directors. Thus, the formation of a limited liability company under the law of any state is analyzed as the formation of a corporation under Rule 801.40.
Please let me know whether I have accurately restated the Premerger Notification Offices views, and correctly applied them to the aforementioned facts. As always, I appreciate your assistance.
Best regards.
Sincerely,
[redacted]
cc: (redacted)