(a) General.
(1) In any proceeding under section
238.21(b) or (c) of this part, a first company is presumed to control
a second company in the situations described in paragraphs (b) through
(h) of this section. The Board also may find that a first company
controls a second company based on other facts and circumstances.
(2) For purposes of
the presumptions in this section, any company that is a subsidiary
of the first company and also a subsidiary of the second company is
considered to be a subsidiary of the first company and not a subsidiary
of the second company.
(b) Management contract or similar agreement. The first company
enters into any agreement, understanding, or management contract (other
than to serve as investment adviser) with the second company, under
which the first company directs or exercises significant influence
or discretion over the general management, overall operations, or
core business or policy decisions of the second company. Examples
of such agreements include where the first company is a managing member,
trustee, or general partner of the second company, or exercises similar
powers and functions.
(c) Ownership
or control of 5 percent or more of voting securities. The first
company controls 5 percent or more of the outstanding securities of
any class of voting securities of the second company, and:
(1) (i) Director
representatives of the first company or any of its subsidiaries comprise
25 percent or more of the board of directors of the second company
or any of its subsidiaries; or
(ii) Director representatives of the first company or any of its
subsidiaries are able to make or block the making of ma jor
operational or policy decisions of the second company or any of its
subsidiaries;
(2) Two
or more employees or directors of the first company or any of its
subsidiaries serve as senior management officials of the second company
or any of its subsidiaries;
(3)
An employee or director of the first company or any of its subsidiaries
serves as the chief executive officer, or serves in a similar capacity,
of the second company or any of its subsidiaries;
(4) The first company or any of its subsidiaries
enters into transactions or has business relationships with the second
company or any of its subsidiaries that generate in the aggregate
10 percent or more of the total annual revenues or expenses of the
second company, each on a consolidated basis; or
(5) The first company or any of its subsidiaries
has any limiting contractual right with respect to the second company
or any of its subsidiaries, unless such limiting contractual right
is part of an agreement to merge with or make a controlling investment
in the second company that is reasonably expected to close within
one year and such limiting contractual right is designed to ensure
that the second company continues to operate in the ordinary course
until the merger or investment is consummated or such limiting contractual
right requires the second company to take an action necessary for
the merger or investment to be consummated.
(d) Ownership or control of 10 percent or more of
voting securities. The first company controls 10 percent or more
of the outstanding securities of any class of voting securities of
the second company, and:
(1) The first company or any of its subsidiaries propose a number
of director representatives to the board of directors of the second
company or any of its subsidiaries in opposition to nominees proposed
by the management or board of directors of the second company or any
of its subsidiaries that, together with any director representatives
of the first company or any of its subsidiaries on the board of directors
of the second company or any of its subsidiaries, would comprise 25
percent or more of the board of directors of the second company or
any of its subsidiaries;
(2) Director
representatives of the first company and its subsidiaries comprise
more than 25 percent of any committee of the board of directors of
the second company or any of its subsidiaries that can take action
that binds the second company or any of its subsidiaries; or
(3) The first company or any of its subsidiaries
enters into transactions or has business relationships with the second
company or any of its subsidiaries that:
(i) Are not on market terms; or
(ii) Generate in the aggregate 5 percent
or more of the total annual revenues or expenses of the second company,
each on a consolidated basis.
(e) Ownership or control of 15 percent or more of
voting securities. The first company controls 15 percent or more
of the outstanding securities of any class of voting securities of
the second company, and:
(1) A director representative of the first company or of any of its
subsidiaries serves as the chair of the board of directors of the
second company or any of its subsidiaries;
(2) One or more employees or directors
of the first company or any of its subsidiaries serves as a senior
management official of the second company or any of its subsidiaries;
or
(3) The first company or any
of its subsidiaries enters into transactions or has business relationships
with the second company or any of its subsidiaries that generate in
the aggregate 2 percent or more of the total annual revenues or expenses
of the second company, each on a consolidated basis.
(f) Accounting consolidation. The
first company consolidates the second company on its financial statements
prepared under U.S. generally accepted accounting principles.
(g) Control of an investment fund.
(1) The first company
serves as an investment adviser to the second company, the second
company is an investment fund, and the first company, directly or
indirectly, or acting through one or more other persons, controls
5 percent or more of the outstanding securities of any class of voting
securities of the second company.
(2) The presumption of control in paragraph (g)(1) of this section
does not apply if the first company organized and sponsored the second
company within the preceding 12 months.
(h) Divestiture of control.
(1) The first company controlled the second
company under section 238.2(e)(1) or (2) of this part at any time
during the prior two years and the first company controls 15 percent
or more of the outstanding securities of any class of voting securities
of the second company.
(2) Notwithstanding
paragraph (h)(1) of this section, a first company will not be presumed
to control a second company under this paragraph if 50 percent or
more of the outstanding securities of each class of voting securities
of the second company is controlled by a person that is not a senior
management official or director of the first company, or by a company
that is not an affiliate of the first company.
(i) Securities held in a fiduciary capacity. For purposes of the presumptions of control in this section, the
first company does not control securities of the second company that
the first company holds in a fiduciary capacity, except that if the
second company is a depository institution or a depository institution
holding company, this paragraph (i) only applies to securities held
in a fiduciary capacity without sole discretionary authority to exercise
the voting rights of the securities.
