New HSR Rules for Transactions Involving Partnerships and LLCs

Many business people and most business lawyers know that a large acquisition or merger may require the parties to comply with the pre-merger reporting requirements and waiting period of the HSR. Determining whether a deal triggered a filing has been fairly straightforward, as long as the parties were corporations (see the sidebar on page 4 for a brief review of the jurisdictional rules). However, the rules governing “non-corporate entities” (partnerships, limited liability companies, business trusts and so on) differed from the rules governing corporations, sometimes in startling ways: The acquisition of 99% of a partnership was not reportable, but the acquisition by a 99% owner of the remaining 1% might well have triggered a filing – even though the owner already controlled the partnership. LLC rules varied substantially from the rest of the HSR canon, and formation of joint venture corporations, LLCs and partnerships were all treated differently.

New rules and a revised Notification and Report Form published by the Federal Trade Commission (FTC) have jettisoned the oddest of these anomalies, and are intended to apply the pre-merger review rules more consistently across all forms of entities. The focus of a HSR review for a non-corporate entity should be when control of the entity changes, and that is what the new rules are trying to engineer. Following is a summary of the new rules.