1404005 Informal Interpretation



Michael Verne

We think being a director and member of the GP is an automatic exclusion from using the exemption.

KW concurs.


From: (Redacted)
Sent: Monday, April 07, 2014 3:56 PM
To: Walsh, Kathryn; Verne, B. Michael

Subject: 802.9 Question

Kate and Mike-

I have a question concerning whether a venture capital fund is eligible for the 802.9 exemption if a founder of the firm serves as an independent director of the target, but the fund otherwise meets the indicia of passivity.

The facts are that Firm A is a venture capital firm. Firm A holds voting securities of Company B through a group of 8 affiliated investment funds. Each of these funds is its own UPE.

Public Company has entered into a merger agreement to acquire the voting securities of Company B. Public Company intends to issue new shares of voting securities as merger consideration for the acquisition of Company B. As a result of the transaction, two funds will acquire and hold greater than $75.9 million of Public Company voting securities. Each fund will hold less than 1% of the issued and outstanding voting securities of Public Company. Neither fund will acquire a board seat, and both funds intend to hold their shares solely for purposes of investment.

Firm A does not currently hold voting securities of Public Company. However, one of the principals and a co-founder of Firm A has served as an independent director of Public Company for more than five years, and will continue to serve as an independent director after the closing of Public Company' s acquisition of Company B. This principal is also a member of the GP of each fund that will acquire shares of Public Company as a result of the proposed transaction.

On these facts, are the two funds able to determine that they have a passive investment intent- and therefore conclude their acquisition of Public Company stock is exempt under 802.9- even though a member of the GP of each fund holds an independent board seat on Public Company?


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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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