2111001 Informal Interpretation

us-ftc-hsr-informal-interpretations-cbe571a276887bb79b3e3dbf63fa440c2111001 Informal InterpretationGuidance

Date
Rule
802.35
Staff
Kristin Shaffer
Response/Comments

We agree that this is exempt.

Question

From: Shaffer, Kristin <kshaffer@ftc.gov>
Sent: Tuesday, November 9, 2021 3:50:29 PM (UTC-05:00) Eastern Time (US & Canada)
To: [Redacted]
Cc: HSRHelp <HSRHelp@ftc.gov>
Subject: RE: 802.35

[Redacted]

We agree that this is exempt.


Best regards,

Kristin

From: [Redacted]
Sent: Monday, November 8, 2021 1:44 PM
To: HSRHelp <HSRHelp@ftc.gov>
Subject: 802.35

Dear PNO:

I have a question about 802.35. The Company is an LLC, and the managers would like to establish an ESOP for its employees. To do so, they must convert the LLC into a stock company. It is disadvantageous from a tax perspective to do so directly, so they propose creating an S corp and a merger sub wholly owned by the S corp, have the ESOP acquire the S corp and then merge the LLC into the merger sub. The merger sub would be an entity within the ESOP when it acquires the LLC. The ESOP is a trust that meets the qualifications of Section 401 of the IRC. The ESOP is controlled by the LLC. And the S corp will have less than $10 million in cash when it acquires the LLC.

Does this transaction qualify for the exemption under 802.35?

Sheinberg, Samuel I.
From: 	HSR Help
Sent: 	Tue sd ay, November 9, 2021 3:51 PM
To: 	Wa lsh, Kat h ry n E.; Be r g, Ka ren E. ; Mus i ck, Vessel ina; Sheinberg, Samue l I. ; Six, Anne; Whitehea d, Nora
Subject: 	FW: 802.35
From: Shaffer, Kr istin <kshaffer@ftc.gov>
Sent: Tuesday, Novembe r 9, 2021 3:50:29 PM (U TC-05:00) Eastern nme (U S & Canada)
To:
Cc: 	e p < 	e p
Subject: RE: 802 .35
We agree that t his is exempt.
-Best regards,
Kr istin
Kristin Shaffer
Attorney
Pr emerger Notification Office
Federal Tra de Commission
202- 326-2388 I kshaffer@hc.gov
From :
Sent: Monday, November 8, 20211:44 PM
To: HSRHelp <HSRHelp@ftc .gov>
Subject: 802.35
Dear PNO:
I have a que stion about 802.35. The Co mpa ny is an LLC, and the managers wou ld like to establish an ES OP for
it s emp loyees. To do so , they must convert the LL C int o a sto ck company. It is disadvantageous from a ta x
perspective to do so direct ly, so they propose creating an S corp and a merger sub wholly owned by the S
co rp , have the ESO P acquire the S corp and then merge the LLC i nto the merger sub . The merger s ub wo uld be
an entity w it hin the ESO P when it acquires the LLC. The ESOP is a trust that meet s the qualifications of Section
401 of the IR C. The ES OP is co ntrolled by the LL C. And the S co rp wi ll have less than $10 mi ll ion in cash when it
acquires the LLC.
Does this transaction qua lify for the exemption under 802 .35?
Thank you.
-
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