• FTC Plans To Expand Hart-Scott-Rodino Requirements For Partnerships and LLCs
  • April 8, 2004 | Authors: William Blumenthal; Jeffrey S. Spigel
  • Law Firm: King & Spalding LLP - Washington Office
  • The Federal Trade Commission has proposed amendments to the Hart-Scott-Rodino Rules ("HSR Rules") that, if adopted, would substantially change the current treatment of partnerships, limited liability companies (LLCs), and other non-corporate entities.

    Historically, the formation of a partnership and most formations of LLCs have not been subject to a reporting obligation. Similarly, most acquisitions of non-corporate interests have not been treated as reportable events unless 100 percent of the interests are acquired.

    Under the proposed amendments, the formation of a controlled non-corporate entity would be treated as a reportable event, so long as the statutory size-of-transaction and size-of-person tests were satisfied. The acquisition of a majority of the economic interest in a non-corporate entity would also be treated as a reportable event. The proposed amendments also include a series of technical changes, as well as revisions that codify long-standing informal interpretations by the FTC's Premerger Notification Office.

    The proposed amendments preserve various exemptions that would continue to cover many partnerships and LLCs, including those that hold certain classes of real property and those that invest in certain carbon-based mineral properties. The FTC also proposes to create a new exemption tailored towards certain LLCs used as financing vehicles. The proposal would also extend the so-called intraperson exemption to non-corporate interests, thus eliminating the current anomaly by which a controlling partner or member has sometimes been required to file for the acquisition of its own holdings at the time a non-corporate entity is terminated or rolled up.

    A public comment period on the proposed amendments is open until June 4, 2004. Final regulations will not be adopted until comments are considered and addressed.