Chapter 8 - § 8.5 • PARTNERSHIP “ROLL-UPS”

• Jurisdiction: Colorado

§ 8.5 • PARTNERSHIP "ROLL-UPS"

Partnership "roll-ups" occur to consolidate the administration and operation of a number of different partnerships. These were generally formed initially as different investment opportunities by a single promoter or related promoters, but after some period of operation the promoter determines that the administrative convenience of one entity is preferable to several different entities.

The roll-up may occur with a corporation or a single "master" partnership being the surviving entity. If a corporation acquires the assets of the partnerships being rolled-up, the transaction is generally accomplished in a tax-free manner pursuant to § 351 of the Internal Revenue Code. A roll-up may be accompanied by corporate mergers, as well.

If a partnership forms, the promoters must be concerned about the potential applicability of the "public partnership" provisions of the Internal Revenue Code § 7704(b).

A roll-up can also include the acquisition of co-tenancies in real estate, mineral properties, or other assets.

Historically, registration statements and private offering circulars for roll-ups or "exchange offers" have been very extensive and complex, in part because of the inherent complexity of the transaction and the disclosure requirements imposed by the SEC. In October 1991, the SEC adopted extensive new rules to govern registration statements filed to accomplish a "roll-up" as defined therein (the Roll-Up Rules).¹⁷

In December 1993, President Clinton signed the Government Securities Act Amendments of 1993, which included the Limited Partnership Roll-Up Reform Act of 1993, adding:

• § 14(h) to the 1934 Act, which imposed certain disclosure and procedural requirements.
• §§ 6(b) and 15A to the 1934 Act, which added substantive requirements to roll-up transactions.

The SEC amended the Roll-Up Rules (now included in Part 9 of Regulation S-K (Items 901, et seq.) to conform to the 1993 legislation in December 1994.¹⁸

A roll-up does not include a repurchase or redemption of outstanding interests in accordance with a pre-existing agreement. There are other exceptions in the Roll-Up Rules. Notably, there are some differences between the definition in the Roll-Up Rules and the 1993 legislation, with the Roll-Up Rules being somewhat more inclusive.

Those rules require, in addition to the principal disclosure document, a separate disclosure supplement for each partnership involved, which describes the effects of the roll-up transaction on...