1211009 Informal Interpretation

Michael Verne

is non-corporation
is a corporation
controls SE, not KGaA


Sent: Thursday, November 15, 2012 11:26 AM
To: Walsh, Kathryn; Verne, B. Michael
Subject: Request for Informal Advice: Foreign Entity

Kateand Mike,

Weare working with a German client that recently went through a corporaterestructuring and we are confirming our analysis of which entity is presentlythe ultimate parent entity. Our client's new form is a German KGaA which is a"partnership limited by shares" that has certain aspects similar to aUS limited partnership, but also similar to rights of a corporation. UnderGerman law, this entity is considered a corporation. The general partnercontrols 100 percent of the voting rights at the annual general meeting of theKGaA, which it exercises for those purposes. The general partner also holds 100percent of the voting rights of another entity (SE) that entitle it to vote fordirectors on the SE Executive Board. The SE Executive Board in turn manages theoperations of the KGaA.

Becausethe general partner has rights to vote for directors of SE's Executive Board,which in turn manages the operations of the KGaA, this appears more akin to acorporation rather than a partnership. In that case the control test would begoverned by the right to vote 50% or more of the voting shares, rather than applyingthe partnership test for control. We did a search of informal interpretationsand did not find anything specific on a KGaA, and thus wanted to check whetherthe FTC PNO has already taken a view on this type of entity in a previousmatter, and if so, what is that view as regards a corporate form or apartnership form? And if not, are the voting rights that allow the generalpartner to vote for directors of SE, which in turn provides management of KGaAsufficient to render these voting securities under 801.1 (f)(1) such that it isthe UPE of both the SE and KGaA?

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