Question
(redacted)
August 9, 1996
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Re:
Dear Mr. Smith:
Thank you for returning my call so promptly this morning. This will confirm our conversation concerning control of a corporation under the Hart-Scott-Rodino Act.
The fact situation I described is a corporation with three stockholders holding all of the voting securities. Stockholders X and Y each hold an equal number of shares, which is the vast majority of the out standing voting securities of the corporation. X and Y are not husband and wife and do not have any other similar relationship. The third shareholder, Z, has the remaining voting securities. Therefore, neither X nor Y has 50 percent of the outstanding voting securities of the corporation.
There are five members of the corporate board of directors. Under the corporate bylaws, X designates two directors and Y designates two directors. The fifth director is the Chief Executive Officer of the corporation. The Chief Executive Officer is nominated jointly by the two directors designated by X and the two directors designated by Y, but neither the directors designated by X alone nor the directors designated by Y alone have the absolute power to nominate the fifth director.
You stated that since neither X nor Y has the absolute power to appoint the fifth director, neither X nor Y would be considered as controlling the corporation. Such control would exist only if one or the other has the absolute power to appoint the fifth director. That is not the case in this situation since both the directors designated by X and the directors designated by Y must jointly nominate the fifth director.
If my understanding of our conversation is mistaken, please give me a call. Again, thank you for your prompt return of my phone call and for your assistance in this matter.
Sincerely,
(Redacted)
cc: (redacted)