0706012 Informal Interpretation

06/15/2007 This is very complicated. Al is not exempt outright. The reason is that the intraperson exemption does not include control through a contractual right to designate directors. You would have to do an 802.4 analysis. Al is contributing more than 50% of the voting securities of A to Newco, so that leaves a minority interest that would not count toward Al 's 802.4 limitation. Al would then have to look at the assets held by B to determine if they include non-exempt assets valued in excess of $59.8 MM. If so, Al 's acquisition of Newco voting securities is not exempt under 802.4. A would have to determine the fair market value of the Newco voting securities it is acquiring to determine if the size-of-transaction test is satisfied. That value would be based on all of the assets held by Newco and all of its liabilities. Presumably, since Newco holds all of the stock of A and B, the value of 100% of the voting securities of Newco would be equal to the FMV of all of the voting stock of A + all of the voting stock of B. A would then apply the percentage of Newco voting securities it will hold to that amount. Similarly B1 would have to do the same analysis. B1 would have to look at the value of all of the non-exempt assets held by both A and B. If that amount exceeds $59.8 MM, Bl's acquisition of Newco voting securities is not exempt under 802.4. It would value its acquisition as above. Any other shareholders of A or B would analyze their acquisitions the same way as B1.