2501013 Informal Interpretation

Date

January 3, 2025

Rule

801.1

Staff

Michelle Fetterman

Response/Comments

No, the assets test in 801.1(b)(1)(ii) is still relevant to holders of the first class of units, despite the exclusion for proceeds from a sale of the subsidiary.

Original Image - 2501013 Informal Interpretation (221.75 KB)

Question

From: Fetterman, Michelle
Sent: Friday, January 3, 2025 10:13 AM
To: [Redacted]
Cc: HSRHelp
Subject: RE: Question re. UPE

No, the assets test in 801. 1(b)(1)(ii) is still relevant to holders of the first class of units, despite the exclusion for proceeds from a sale of the subsidiary.
________________________________________
From: [Redacted]
Sent: Monday, December 30, 2024 4:50:13 PM (UTC-05:00) Eastern Time (US & Canada)
To: HSRHelp <HSRHelp@ftc.gov>
Cc: [Redacted]
Subject: Question re. UPE

Good afternoon,

I hope this email finds you well. We are trying to determine the UPE of an LLC in connection with the sale of a subsidiary controlled by the LLC.
The LLC has three classes of units with varying owners.
One class is entitled to all ordinary distributions based on operations and all assets on dissolution, but expressly excluding in each case the proceeds from a sale of the subsidiary.
The other two classes are entitled to all distributions of net sales proceeds (whether while the LLC is extant or upon liquidation). One of these classes receives all sales proceeds up to a stated $ threshold, the other class receives all proceeds above of that threshold.
We are assuming that, for purposes of determining the UPE of the LLC for filing, we should estimate the actual sales proceeds available for distribution and run them through the waterfall, such that, the ownership of the first class (which will not participate in these specific distributions) would effectively be disregarded and we would look to the likely distributions to the second two classes to determine the UPE.
Is that the correct approach?
Thank you in advance for your help.

Sheinberg, Samuel I.
To: 	HSRHe lp; HSR Auto Forward Li st
Subject: 	RE : Question re. UPE
From: Fetterman, Michelle
Sent: Friday, January 3, 2025 10:13 AM
To:
Cc : HSRHelp
Subje ct : RE: Question re. UPE
No, the assets test in 801.1 (b )( 1)( ii) is st i ll relevant to holders of the first class of units, despite the exclusion for proceeds from
a sale of the subsidiary.
From:
Sent: Monday, December 30, 2024 4:50:13 PM (UTC-05:00) Eastern Time (US & Canada)
To: 	< ~~~=~.........~ >
Cc:
Subje ct : Question re. UPE
Good afternoon,
I hope this email finds you well. We are try ing to determine the UPE of an LLC in connection with the sa le of a subsidiary
contro ll ed by the LLC.
The LLC has three classes of units wi th varying owners.
One class is entitled to all ordinary distri but ions based on operations and all assets on dissolution, but expressly excluding in
each case the proceeds from a sale of the subsidiary.
The other two classes are entitled to a ll distri but ions of net sales proceeds (whether wh ile the LLC is extant or upon
liqui dat ion). One of these classes receives a ll sales proceeds up to a stated$ threshold, the other class receives all proceeds
above of that threshold.
We are assuming that , for purposes of determ in ing the UPE of the LLC for filing, we should estimate the actual sales proceeds
available for di stribut ion and run them through the waterfall, such that, the ownership of the first class (which will not
participate in these specific di st ribut ions) would effectively be disrega rded and we would look to the likely distributions to the
second two classes to determine the UPE.
Is that the correct approach?
Thank you in advance for your help.
Best regards,
1

2501013 Informal Interpretation

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