2103004 Informal Interpretation

Date:

Tags:

Rule:
801.1
Staff:
Kathryn Walsh
Response/Comments:

X is the UPE.

Question

From: Walsh, Kathryn E.


Sent: Thursday, March 11, 2021 1:02:51 PM (UTC-05:00) Eastern Time (US & Canada)


To: [Redacted]


Cc: [Redacted]


Subject: FW: Inquiry

X is the UPE.

From: [Redacted]


Sent: Wednesday, March 10, 2021 4:19:31 PM (UTC-05:00) Eastern Time (US & Canada)


To: [Redacted]


Subject: Inquiry

Greetings,

We are emailing you in order to determine whether you agree with our view that X, a natural person, is the deemed holder of the shares held in the below-described trust, based upon her ability to appoint and remove trustees, even though X is not a signatory to the trust agreement.

The Trust holds 60,000 shares of voting securities (the “Shares”) of Company S. The Trust was established for the benefit of the minor children of Y and Z. Z is the Settlor of the Trust.

16 CFR 801.1(b)(2) provides that a person who has the contractual power to designate 50% or more of the trustees of (i) an irrevocable trust, or (ii) a trust in which the settlor does not retain a reversionary power, is deemed to control the trust. The regulations provide no definition of a power that constitutes a “contractual” power.

The Trust is irrevocable. Z, the Settlor, has not retained a reversionary power and no person has a power which could result in the Settlor receiving anything from the trust.

X, the Settlor’s mother-in-law, has the sole power to remove and replace any trustee. In addition, X has the power to designate another person to hold this power. Therefore, if X’s power is a “contractual” power, X controls the Trust and is deemed to hold the Trust’s assets, including the Shares. See Interpretations 12 and 13 of the Premerger Notification Practice Manual, 5th Edition (2015) ; HSR Informal Interpretation Letters, #1006005 (June 15, 2010).

Would you agree based upon the above that X would control the Trust and be deemed the holder of the Shares?

 

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.

Learn more about Informal Interpretations.