Question
October 13, 1992
VIA HAND DELIVERY
Victor L. Cohen, Esq.
Senior Staff Attorney
Premerger Notification Office
Bureau of Competition
Â鶹´«Ã½ Trade Commission
Room 310
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Re: Application of the Premerger Notification Rules
to the Formation of Limited Liability Companies
Dear Victor:
Following up on our recent telephone conversation, I am writing to confirm my understanding of the Premerger Notification Offices treatment of limited liability companies, and the application of these views to a fact pattern which can be summarized as follows.
Persons A and B plan to form a limited liability company under Delaware or Maryland law. A and B satisfy the commerce criterion contained in 15 U.S.C. 18A(a)(1), each has annual net sales and total assets exceeding $100 million, and each plans to contribute more than $15 million of assets to the venture. In exchange, A will acquire about 65% - 75% of the new companys equity, and B will acquire about 25% - 35%. Finally, assume that no exemptions apply.
I understand that the FTC would require A and B to report such a transaction under the Hart-Scott-Rodino Act, because the Premerger Notification Office views limited liability companies as tantamount to corporations. More specifically, an equity interest in a limited liability company is considered a voting security under Rule 801.1(f), because that interest will usually (PNO staff note: may) entitle the holder to vote for individuals exercising functions similar to corporate directors. Thus, the formation of a limited liability company under the law of any state is analyzed as the formation of a corporation under Rule 801.40.
Please let me know whether I have accurately restated the Premerger Notification Offices views, and correctly applied them to the aforementioned facts. As always, I appreciate your assistance.
Best regards.
Sincerely,
[redacted]
cc: (redacted)