Question
(redacted)
December 5, 1995
Patrick Sharpe, Esquire
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washing ton, D.C. 20580
Re: Meaning of Control As
Applied to Partnership Entity
Dear Patrick:
This letter memorializes your advice to me in our conversation of yesterday afternoon. I, in essence, described a situation in which Limited Partnership A contemplates acquiring certain assets from an entity meeting the size-of-person test in a transaction meeting the size-of-transaction test under the Hart-Scott-Rodino Act. I sought your assistance in ascertaining whether A might meet the size-of-person test.
The general partner of A is Limited Partnership B; the general partner of B is Corporation C. A had less than $10 million of revenues and less than $10 million of assets as shown on its financial statements and balance sheet for its last fiscal year. The only remaining question was whether B, C or any stockholder of C might be deemed an ultimate parent entity over A as defined in 16 CFR 801.1(a)(3), which in turn rests on application of the term control under 16 CFR 801.1(b).
You advised that control of a partnership (an entity that has not outstanding voting securities) is determined under 801.1(b)(1)(ii). Under that provision, if neither B nor any other person or entity with an ownership interest in A possesses the right to 50 percent or more of the profits of A or the right in the event of dissolution to 50 percent or more of the assets of A, then there is no ultimate parent entity over A for purposes of applying the size-of-person test. Section 801.1(b)(2) (concerning contractual power to designate specified individuals) is inapplicable to the control test in a partnership context, as suggested by example 2 under 801.1(b) and as interpreted by the Premerger Notification Office.
My thanks to you for your assistance in this regard.
Sincerely,
(redacted)
cc: (redacted)