Friday, February 07, 2020 5:37:42 PM
(b) The classes of securities eligible for the suspension provided in paragraph (a) of this section are:
(1) Any class of securities, other than any class of asset-backed securities, held of record by:
(i) Fewer than 300 persons, or in the case of a bank; a savings and loan holding company, as such term is defined in section 10 of the Home Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such term is defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841), 1,200 persons; or
Sounds like WMI->WMILT+WMIH in a reverse triangular merger??
What Is a Reverse Triangular Merger?
A reverse triangular merger is the formation of a new company that occurs when an acquiring company (WMIH???) creates a subsidiary (WMIIC/WMMRC???) , the subsidiary purchases the target company and the subsidiary is then absorbed by the target company. A reverse triangular merger is more easily accomplished than a direct merger because the subsidiary has only one shareholder—the acquiring company—and the acquiring company may obtain control of the target's nontransferable assets and contracts.
A reverse triangular merger, like direct mergers and forward triangular mergers, may be either taxable or nontaxable, depending on how they are executed and other complex factors set forth in Section 368 of the Internal Revenue Code. If nontaxable, a reverse triangular merger is considered a reorganization for tax purposes.
A reverse triangular merger may qualify as a tax-free reorganization when 80% of the seller’s stock is acquired with the voting stock of the buyer; the non-stock consideration may not exceed 20% of the total.
Understanding Reverse Triangular Merger
In a reverse triangular merger, the acquirer creates a subsidiary that merges into the selling entity and then liquidates, leaving the selling entity as the surviving entity and a subsidiary of the acquirer. The buyer’s stock is then issued to the seller’s shareholders. Because the reverse triangular merger retains the seller entity and its business contracts, the reverse triangular merger is used more often than the triangular merger.
In a reverse triangular merger, at least 50% of the payment is the stock of the acquirer, and the acquirer gains all assets and liabilities of the seller. Because the acquirer must meet the bona fide needs rule, a fiscal year appropriation may be obligated to be met only if a legitimate need arises in the fiscal year for which the appropriation was made.
A reverse triangular merger is attractive when the seller’s continued existence is needed for reasons other than tax benefits, such as rights relating to franchising, leasing or contracts, or specific licenses that may be held and owned solely by the seller.
Since the acquirer must meet the continuity of business enterprise rule, the entity must continue the target company’s business or use a substantial portion of the target’s business assets in a company. The acquirer must also meet the continuity of interest rule, meaning the merger may be made on a tax-free basis if the shareholders of the acquired company hold an equity stake in the acquiring company. In addition, the acquirer must be approved of by the boards of directors of both entities
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