FTC Announces Changes to Hart-Scott-Rodino Premerger Notification Rules
Under the Hart-Scott-Rodino Act, parties to mergers and acquisitions of a certain size must provide advance notification to the U.S. Department of Justice and the Federal Trade Commission before the transaction can close. Failure to provide the required notices and await the termination of the 30-day statutory waiting period can result in significant penalties.
The FTC recently announced two sets of changes that affect what types of transactions need to be reported.
First, the jurisdictional thresholds were increased to reflect inflation-based adjustments in the levels established under the Act. The new thresholds, which became effective March 2, are as follows:
- Transactions having a value of $53.1 million or more are reportable if one party to the transaction has assets or revenues of at least $106.2 and the other party has assets or revenues of at least $10.7 million
- All transactions valued at $212.3 million or more are reportable
Second, the FTC announced a new approach to transactions involving noncorporate entities such as partnerships and limited liability companies. Under prior rules, the formation of a partnership was not reportable under the Act, whereas the formation of an LLC was reportable if the size of the transaction and size of person tests were met. Acquisitions of partnership interests and LLC interests generally were not reportable unless they resulted in the acquiring party holding 100 percent of the interests. Under the new rules, assuming jurisdictional thresholds are met:
- The formation of an LLC or partnership is reportable if one person controls the entity upon its formation.
- The acquisition of an interest in an LLC or partnership is reportable if a person acquires control of the entity through the acquisition.
- Under both rules, a person will generally control an entity if the person has the right to 50% of more of the entity’s profits or 50% or more of the entity’s assets upon dissolution.
These changes will become effective on April 7, 2005.
If you have any questions, contact the Stoel Rives lawyer with whom you regularly work or one of the following lawyers:
Wally Van Valkenburg (503) 294-9514
Ellen Theodorson (503) 294-9143
Sara Gray (503) 294-9883