0004009 Informal Interpretation

us-ftc-hsr-informal-interpretations-4089fd7bce9375294b59061d4b36b8030004009 Informal InterpretationGuidance

Open source
Date
Rule
801.12
Staff
Michael Verne
Response/Comments
Advised to use as the numerator the ratio for this director. i.e: if you held 100 of the 500 total shares of class A you would calculate as follows 100/500 x 2/5 = 8% 100/500 x /5 = 2% Total percentage held in issuer +10% N. Ovuka, T. Hancock, and R.Smith concur

Question

From: [redacted]

To: "mverne@ftc.gov" <mverne@ftc.gov>

Subject: 801.12

Mike - I have another question for you on applying the fun formula in 801.12. I have a situation where X's articles state that the holders of Series A shares voting as a class elect 2 of 5 directors. The holders of Common voting as a class elect 2 of 5 directors, and the fifth director is elected upon the approval of (i) the holders of the majority of the A shares and (ii) the holders of Common Stock voting as a class. If Y just holds A shares, would I calculate Y's percentage as follows?

[(The A shares held by Y divided by all A shares outstanding) times (2 divided by 6)] plus [(the A shares held by Y divided by all A and Common shares outstanding) times (1 divided by 6)]?

I am concerned that application of the formula may not work in a case where the last director must be approved by the majority of the A voting as a class and the majority of the Common voting as a class. Strict application of the formula overstates Y's holdings in X because even if Y holds a majority of the A shares, Y cannot unilaterally elect the fifth director because a majority of the Common could veto his choice.

What do you think?

Thanks

[redacted]

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