DD Support Board and Research Team

[OMOLIVES]

No, the SEC does not require 100% ownership in order to be considered a wholly owned subsidiary .... https://www.law.cornell.edu/cfr/text/17/210.1-02

(aa) Wholly owned subsidiary. The term wholly owned subsidiary means a subsidiary substantially all of whose outstanding voting shares are owned by its parent and/or the parent's other wholly owned subsidiaries.

Also,

https://www.sec.gov/rules/final/33-7878.htm

Definition of 100% owned

A subsidiary in corporate form is 100% owned for the purposes of Rule 3-10 if all of its outstanding voting shares and any outstanding securities convertible into its voting shares are owned, directly or indirectly, by its parent company.27 We are adopting this definition because it assures investors in the guaranteed securities that there is no competing common equity interest in the assets or revenues of the subsidiary. This allows investors to evaluate the creditworthiness of the parent and subsidiary as a single, indivisible business. If a third party holds an interest in the subsidiary, the risks associated with investment in parent and subsidiary are not identical. Where those risks are not identical, there is not the financial unity between the subsidiary and its parent that is needed to justify the modified financial information permitted by paragraphs (b) through (f) of Rule 3-10.

To remain 100% owned, a subsidiary corporation may not issue any securities convertible into its voting shares unless those convertible securities are owned, directly or indirectly, by its parent company. This would preclude the use of options that are exercisable into voting shares unless those options are owned, directly or indirectly, by the subsidiary's parent company.

One commenter addressed convertible securities.28 That commenter believed that a subsidiary that has issued securities convertible into its voting securities to someone other than its parent company should be considered 100% owned if the parent company has the unilateral right to reacquire such instruments for a fixed or determinable price before their conversion. We do not agree that the definition of 100% owned should include a subsidiary that issued to a third party securities convertible into its voting shares, irrespective of the parent's right to repurchase. A subsidiary that has issued to any person other than its parent company securities that are convertible into its voting stock does not have the financial unity with its parent company that is necessary to qualify for the modified financial information permitted by paragraphs (b) through (f) of Rule 3-10.

(B) Interpretive position regarding foreign issuers and guarantors

The definition of 100% owned in Rule 3-10 precludes any outside ownership of voting shares for subsidiary corporations. Therefore, subsidiaries organized in a jurisdiction that requires directors to own shares would not meet the 100%-owned test. Nonetheless, we concur in the staff's response to Crown Cork & Seal Company, Inc. (March 10, 1997), in which the staff agreed to a no-action request under SAB 53 from a subsidiary organized in the Republic of France even though it had more than one voting shareholder. That no-action request stated that French law required the subsidiary to have a total of seven shareholders and also required each director to own at least one share. The request explained that, in order to comply with this requirement, the parent company would transfer approximately six shares, equaling approximately 0.24% of the parent company's outstanding shares, to its directors. In granting the no-action position, the staff noted that the non-parent company ownership was at the minimum level required to comply with French law. We have not included this exception in amended Rule 3-10 because it is an uncommon situation that should be handled through the no-action request process. However, the staff will continue to recognize the exception presented by Crown Cork & Seal Company, Inc., as well as any future no-action requests from other issuers under substantially similar facts.29