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)