8305006 Informal Interpretation

Date:
Rule:
801.11
Staff:
Dana Abrahamsen

Question

(redacted)

May 26, 1983

Dana Abrahamsen, Esq.
Federal Trade Commission
Sixth Street at Pennsylvania Avenue NW
Room 313
Washington, D.C. 20580

Re:Hart-Scott-Rodino

Improvements Act of 1976

as amended (the HSR)

Dear Dana:

This will confirm our several recent telephone

conversations regarding the use of partnerships as a vehicle

to acquire voting securities.

A partnership is its own ultimate parent entity

(UPE) and there is no group concept under the HSR Act, as

there is, for example, under section 13 of the Securities Act

of 1934. Therefore, the voting securities of an issuer held

by each of a partnership and its general and/or limited

partners will not be aggregated for any purpose under the HSR

Act. This is true, providing the requisite business purpose

exists, even if (a) the partnership requires such voting

securities at a time when its partners are prohibited form

doing so themselves without filing a premerger notification

form and observing the waiting period; (b) the partners

infuse funds into the partnership to acquire such voting

securities and (c) the partnership is formed to acquire such

voting securities.

A partnership with assets of less than $10,000,000

as at the time of its latest regularly prepared balance sheet

is exempt from complying with the filing and waiting period

requirements of the HSR Act and a newly formed partnership

has, as at the date of formation, no regularly prepared bal-

ance sheet. There is no specific tine at which a UPE must

prepare a balance sheet, but an UPE may not fail to prepare

a balance sheet in order to perpetuate its status as an

exempt entity.

As a result of the foregoing, and until it is

required to have a regularly prepared balance sheet showing

assets in excess of $10,000,000, a partnership which (a) is

newly formed and funded with, for example, $100,000,000 in

cash and/or unconditional obligations of its partners to

contribute cash to its capital, is exempt from complying with

the filing and waiting period requirements of the HSR

Act and (b) has assets of less than $10,000,000 as at the

date of its latest regularly prepared balance sheet and is

funded with, or example, an additional $100,000,000 in cash

and/or unconditional obligations of its partners (old and

new) to contribute cash to its capital, is likewise exempt

from complying with the filing and waiting period require-

ments of the HSR Act.

In addition, any combination of the scenarios of

the preceding paragraphs will cause a result consistent with

the results described in those paragraphs.

The absence of a legitimate business purpose

will render unavailable to the UPE the benefits described

herein. However, there exists a broad range of legitimate

business purposes which may be available to an UPE whose

purpose is not solely to avoid the application of the HSR

Act, including a desire (a) to achieve certain tax results

and/or (b) to obtain additional funds (whether existing in,

or obtainable by, the partnership or partnerships) and/or the

participation of additional investors (whether on the same or

different terms as other investors).

As you may recall, in the past, I have discussed

various aspects of the HSR Act with you and other attorneys

at the FTC. Certain of the conclusion contained in this

letter are based upon one or more of those conversations and

the related correspondence and this letter is intended to

supplement rather supercede them .

Thank you again for you time and your help.

Very truly yours,

(Redacted)

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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