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0704001 Informal Interpretation
us-ftc-hsr-informal-interpretations-ba4985dcfbb10b597cc048aa101d72c50704001 Informal InterpretationGuidance
Date
Rule
801.1(b)
Response/Comments
Unless the voting agreement gives the right to designate a majority of the board, which I think can be distinguished from the revocable right to vote 50% of the voting securities. The two tests for control of a corporation are having the contractual power presently to designate 50 percent or more of the directors or holding 50 percent or more of the outstanding voting securities. Having a revocable right to vote shares does not confer beneficial ownership, so the person who has that right does not hold the voting securities. Based on this, I don't think your scenario fits either prong of the rule.
Question
From: (redacted)
Sent: Monday, April 02, 2007 7:54 AM
To: Verne, B. Michael
Subject: Some advice, please
Icontinue to be confused about what I think is a simple question.
X holds a minority of the stock of acorporation and through a contractual arrangement with another minorityshareholder, has the power to vote the shares of that minority shareholder.Between his holdings and his contractual arrangement, X has the power to castmore than 50% of the votes for election of directors. X doesn't have any otherownership interest in the second shareholder's shares and thus doesn'tbeneficially own those shares. The contractual arrangement is a simple votingarrangement, allowing X to vote those shares whenever there is an election ofdirectors. But X doesn't have a contractual power "presently to designatehalf or more of the directors," in the sense that X cannot remove andreplace half or more of the directors at a time of his choosing. The votingarrangement is not an irrevocable proxy; either party may terminate it at will.
Does X control the issuer?
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