Date
Rule
801.40
Response/Comments
In order to determine whether a formation of a new corporation is within 801.40 you must examine facts such as time, identity of purchasers, initial plan, capitalization & whether contributions are being used to acquire target. In this case the facts indicate that 801.40 applies unless the LLC is a partnership. The LLC will be within the Management Committee, which will "determine & implement" the management of the LLC. These duties indicate, not a board of directors, but only managers; therefore, it appears that a partnership is being formed. Even if this was a formation of an LLC corporation type of organization, the fact that its members are limited to officers, bd. directors & employees of the forming person [illegible] it a partnership.
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Question
December 13, 1995
VIA TELECOPY
Victor L. Cohen, Esq.
Senior Attorney
Premerger Notification Office
Federal Trade Commission
601 Pennsylvania Avenue, NW
Washington, D.C. 20580
Re: Formation of Limited Liability Company
Dear Victor:
We are writing to confirm your views as to whether the proposed formation of the limited liability company described below (the "LLC") is a reportable event under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Formation of LLC
- Corporation A will form the LLC by contributing to it certain assets. One of Corporation A's subsidiaries ("A Sub") will own 75% of the membership interests in the LLC, and a second subsidiary will own 25% of the membership interests.
- The second subsidiary will sell its 25% membership interest to two subsidiaries of Corporation B ("B Sub 1 and B Sub 2").
- Accordingly, A Sub will be the 75% member of the LLC, and B Sub 1 and B Sub 2 will each be 12 1/2% members (the members of the LLC are referred to as the "Members").
Management of LLC
- The LLC will have a Management Committee with full authority to determine and implement the operations and financial management of the LLC. Day-to-day operations of the LLC, including a General Manager, subject to the overall authority of the Management Committee.
- A Sub will have the right to designate three members of the Management Committee, and B Sub 1 and B Sub 2 will together have the right to designate one member (so long as they hold at least 5% membership interest in the LLC). Most business matter will be determined by majority vote of the Management Committee, except that certain significant matters (for example, incurrence of substantial indebtedness) will require a unanimous vote.
- The Management Committee will consist only of employees of the Members, although the General Manager will be a nonvoting member. The Members will have no right to designate third parties who are not their employees to serve on the Management Committee.
We look forward to speaking with you shortly, Thank you for your attention to this matter.
Sincerely,
[redacted]