Hart-Scott-Rodino Regulations

• Pages: 369-507

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HART-SCOTT-RODINO REGULATIONS

Code of Federal Regulations, Title 16

Part 801—Coverage Rules

§ 801.1 Definitions.

When used in the act and these rules—

(a)(1) Person. Except as provided in paragraphs (a) and (b) of

§801.12, the term person means an ultimate parent entity and all entities

which it controls directly or indirectly.

Examples: 1. In the case of corporations, “person” encompasses

the entire corporate structure, including all parent

corporations, subsidiaries and divisions (whether consolidated

or unconsolidated, and whether incorporated or

unincorporated), and all related corporations under common

control with any of the foregoing.

2. Corporations A and B are each directly controlled by the same

foreign state. They are not included within the same “person,”

although the corporations are under common control, because

the foreign state which controls them is not an “entity” (see

§801.1(a)(2)). Corporations A and B* are the ultimate parent

entities within persons “A”, and “B” which include any

entities each may control.

3. Since a natural person is an entity (see §801.1(a)(2)), a natural

person and a corporation which he or she controls are part of

the same “person.” If that natural person controls two

otherwise separate corporations, both corporations and the

natural person are all part of the same “person.”

* Throughout the examples to the rules, persons are designated (“A”, “B,”

etc.) with quotation marks, and entities are designated (A, B, etc.) without

quotation marks.

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4. See the example to §801.2(a).

(2) Entity. The term entity means any natural person, corporation,

company, partnership, joint venture, association, joint-stock company,

trust, estate of a deceased natural person, foundation, fund, institution,

society, union, or club, whether incorporated or not, wherever located

and of whatever citizenship, or any receiver, trustee in bankruptcy or

similar official or any liquidating agent for any of the foregoing, in his or

her capacity as such; or any joint venture or other corporation which has

not been formed but the acquisition of the voting securities or other

interest in which, if already formed, would require notification under the

act and these rules:

Provided, however, that the term entity shall not include any foreign

state, foreign government, or agency thereof (other than a corporation or

unincorporated entity engaged in commerce), nor the United States, any

of the States thereof, or any political subdivision or agency of either

(other than a corporation or unincorporated entity engaged in commerce).

(3) Ultimate parent entity. The term ultimate parent entity means an

entity which is not controlled by any other entity.

Examples: 1. If corporation A holds 100 percent of the stock of

subsidiary B, and B holds 75 percent of the stock of its

subsidiary C, corporation A is the ultimate parent entity, since

it controls subsidiary B directly and subsidiary C indirectly,

and since it is the entity within the person which is not

controlled by any other entity.

2. If corporation A is controlled by natural person D, natural

person D is the ultimate parent entity.

3. P and Q are the ultimate parent entities within persons “P” and

“Q.” If P and Q each own 50 percent of the voting securities

of R, then P and Q are both ultimate parents of R, and R is

part of both persons “P” and “Q.”

(b) Control. The term control (as used in the terms control(s),

controlling, controlled by and under common control with ) means:

(1) Either. (i) Holding 50 percent or more of the outstanding voting

securities of an issuer or

HART-SCOTT-RODINO REGULATIONS 371

(ii) In the case of an unincorporated entity, having the right to 50

percent or more of the profits of the entity, or having the right in the

event of dissolution to 50 percent or more of the assets of the entity; or

(2) Having the contractual power presently to designate 50 percent or

more of the directors of a for-profit or not-for-profit corporation, or in

the case of trusts that are irrevocable and/or in which the settlor does not

retain a reversionary interest, the trustees of such a trust.

Examples: 1. Corporation A holds 100 percent of the stock of

corporation B, 75 percent of the stock of corporation C, 50

percent of the stock of corporation D, and 30 percent of the

stock of corporation E. Corporation A controls corporations

B, C and D, but not corporation E. Corporation A is the

ultimate parent entity of a person comprised of corporations

A, B, C and D, and each of these corporations (but not

corporation E) is “included within the person.”

2. A statutory limited partnership agreement provides as follows:

The general partner “A” is entitled to 50 percent of the

partnership profits, “B” is entitled to 40 percent of the profits

and “C” is entitled to 10 percent of the profits. Upon

dissolution, “B” is entitled to 75 percent of the partnership

assets and “C” is entitled to 25 percent of those assets. All

limited and general partners are entitled to vote on the

following matters: the dissolution of the partnership, the

transfer of assets not in the ordinary course of business, any

change in the nature of the business, and the removal of the

general partner. The interest of each partner is evidenced by

an ownership certificate that is transferable under the terms of

the partnership agreement and is subject to the Securities Act

of 1933. For purposes of these rules, control of this

partnership is determined by paragraph (1)(ii) of this section.

Although partnership interests may be securities and have

some voting rights attached to them, they do not entitle the

owner of that interest to vote for a corporate “director” as

required by §801.1(f)(1). Thus control of a partnership is not

determined on the basis of either paragraph (1)(i) or (2) of

this section. Consequently, “A” is deemed to control the

partnership because of its right to 50 percent of the

partnership’s profits. “B” is also deemed to control the