2204004 Informal Interpretation

Sheinberg, Samuel I.
From: 	Sheinberg, Samuel I.
Sent: 	Monday, April 18, 2022 1:51 PM
To:
Cc: 	HSRHelp
Subject: 	RE: Request for Informal Guidance with Respect to Determining the UPE of the Acquired Person
The Husband and Wife jointly control 64% of the company. This includes each of their 14% interest in the revocable
trusts and the Wife’s 36% interest in the irrevocable trust - because she can remove and replace trustees at any time -
meaning together they are the UPE of the Company.
From: HSRHelp <HSRHelp@ftc.gov>
Sent: Friday, April 15, 2022 2:19 PM
To: Walsh, Kathryn E. <kwalsh@ftc.gov>; Berg, Karen E. <KBERG@ftc.gov>; Musick, Vesselina <vmusick@ftc.gov>;
Shaffer, Kristin <kshaffer@ftc.gov>; Sheinberg, Samuel I. <SSHEINBERG@ftc.gov>; Six, Anne <asix@ftc.gov>; Whitehead,
Nora <nwhitehead@ftc.gov>
Subject: FW: Request for Informal Guidance with Respect to Determining the UPE of the Acquired Person
From:
Sent: Friday, April 15, 2022 2:17:38 PM (UTC-05:00) Eastern Time (US & Canada)
To: HSRHelp <HSRHelp@ftc.gov>
Subject: Request for Informal Guidance with Respect to Determining the UPE of the Acquired Person
Ladies and Gentlemen:
I am writing the PNO to request its informal guidance in determining who the UPE of the acquired person is in a
transaction for which we will be filing a Notification and Report Form next week.
We represent the two “owners” of an LLC (the “Company”), a husband (“H”) and wife (“W”) who from the Company’s
inception on June 1, 2018, were the Company’s sole equity holders, with each owning 50% of the Company. However, in
late 2020, the H and W transferred their equity to four trusts, two that are revocable and two that are irrevocable, with
the H and W having one of each. Rach revocable trust owns 14% of the Company, and each irrevocable trust owns 36%
of the Company. The analysis for the revocable trusts is easy; the H and the W will each be deemed to be the owner of
the 14% of the equity held by his or her’s revocable trust. The situation with respect to the irrevocable trusts is more
complicated, and it is with respect to that situation that I seek your guidance.
The W’s irrevocable trust, for which an unrelated attorney is the trustee, is for the benefit of the H and any of W’s
descendants (currently there are none). At the H’s death, the remaining trust assets will be distributed first to any living
descendants, second to certain persons, and third the rest to a non-profit charitable foundation organized by the H and
W. Thus, the W has no reversionary interest in the trust corpus; however, during her lifetime she can remove the trustee
of her irrevocable trust at any time and for any reason and can fill any trustee vacancy. (If the W removes the current
trustee, the H would be the replacement trustee unless he chose not to so serve.) The question is whether the W’s
ability to remove the trustee at any time and for any reason makes her the owner of the trust corpus (the 36% interest
in the Company). If it does, then she owns 50% of the Company. If it does not, then the W only owns 14% of the
Company and her irrevocable trust owns 36% of the Company.
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The H's irrevocable trust, for w hi ch the W serves as trustee, is for the benefit of the Wand any of H's descendants
(current ly there are none ). At the H's death, if the Wis still a li ve, the trust corpus is transferred to t w o trusts for her
benefit. If the W does not surv ive the H, then then the remaining trust assets wi ll be distr i buted first to any living
descendants, second to certain persons, and third the rest to the same charitable foundat ion organized by the Hand W .
Thus, the H has no reversi onary i nterest in the trust corpus; ho w ev er, during his li fet i me he can remo ve the trustee of
his irrevocable trust but only for Cause (a defined term ) and he can fi ll any trustee vacancy. The question is w hether the
H's abili ty to remo ve the trustee for Cause makes him the ow ner of the trust corpus (the 36% i nterest in the Company).
If it does, then he owns 50% of the Company. If it does not , then the H on ly ow ns 14% of the Company and his
irrevocable trust ow ns 36% of the Company.
So here are w hat I think are the scenarios as to w ho is the UPE for the acquired person.
1. 	The H and W each as a 50% ow ner.
2. 	The Was a 50% ow ner, wi th the H ow ning 14% and his irrevocable trust ow ning 36 %.
3. 	The Company, wi th the H and W each owning 14% and each of the ir irrevocable trusts ow ning 36%.
Your guidance w ou ld be greatly appreciated.
Best regards,
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