2207007 Informal Interpretation

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Sheinberg, Samuel I.
From: 	HSRHelp
Sent: 	Tuesday, July 12, 2022 1:25 PM
To: 	Walsh, Kathryn E.; Berg, Karen E.; Musick, Vesselina; Sheinberg, Samuel I.; Six, Anne; Whitehead, Nora;
Fetterman, Michelle
Subject: 	FW: Request for Informal Interpretive Advice
To:
Subject: RE: Request for Informal Interpretive Advice
From: Shaffer, Kristin <kshaffer@ftc.gov>
Sent: Tuesday, July 12, 2022 1:24:32 PM (UTC-05:00) Eastern Time (US & Canada)
To determine control of a corporation, you must look at both the voting rights inherent in the voting security itself, i.e.,
those provided in the bylaws or formation documents for the corporation, as well as the rights designated by contract.
Rule 801.12 is applicable to the rights of the security, and thus the analysis for 801.1(b)(1)(i). The analysis of contractual
rights of control for 801.1(b)(2) should reflect the practical right of any person to designate 50% or more of the
directors. This analysis is separate from Rule 801.12.
Best regards,
Kristin
Kristin Shaffer
Attorney
Premerger Notification Office
Federal Trade Commission
202-326-2388 | kshaffer@ftc.gov
From:
Sent: Monday, July 11, 2022 3:34 PM
To: HSRHelp <HSRHelp@ftc.gov>
Subject: Request for Informal Interpretive Advice
L Draft: 5/3/22
All,
We have a quick question regarding the application of Rule 801.12 to the following situation. Corporation P has
two series of common stock, Series A and Series B. The shares of Series A and Series B common stock each
have one vote per share. There are at present five (5) directors of Corporation P. The holders of Series B
common stock, voting as a separate class, have the contractual right to elect one director. The holders of the
Series A common stock, voting as a separate class, have the contractual right to elect the other four (4)
directors.
No person holds 50% of more of the outstanding shares of Series A common stock. Two persons each hold 50%
of the outstanding shares of Series B common stock. Corporation P also has outstanding stock options
representing the right to purchase 5.53% of its Series A common stock on a fully-diluted basis.
More specifically, the largest shareholder of Series A common stock, X, holds 46.2% of the shares of Series A
common stock and no shares of Series B common stock. The two shareholders of Series B common stock, Y
and Z, each hold 50% of the shares of Series B and no shares of Series A common stock. None of X, Y and Z
hold any options to purchase shares of Series A common stock. It is our understanding that convertible voting
securities such as these stock options are disregarded in calculating the percentage of voting securities.
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Applying Rule 801.12(b), the percentage ofC01poration P common stock held by (1) Xis 36.96% (46.2% x
4/5); (2) Y is 10% (50% x 1/5); and (3) Z is 10% (50% x 1/ 5).
Based on the foregoing, it appears that no person (1) holds 50% or more of the outstanding voting secmities of
Co1poration P or (2) has the power presently to elect 50% or more of the directors of Co1poration P, and that, as
a result, Co1poration Pis its own ultimate parent entity.
Please le t us know if you agree with this analysis and conclusion.
Thank you.
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