To: Deputy and Counsel Kelsey
From: Assistant Counsel Barras
Date: March 24, 1999
Subject: [ ] Incorporation
[ ] has written a memorandum of law concerning the pending incorporation of the [ ] L.P. The incorporation will be effectuated by merging [ ] into a newly-formed corporation [ ] . The existing partners of [ ] will contribute their partnership interests to [ ] and receive, in turn, approximately 85-90% of the stock of the corporation. The remainder of the stock will be sold in a public offering and no individual investor is expected to acquire more than 5% of the outstanding shares. As [ ] currently wholly-owns two banking organizations under the Department's jurisdiction, a limited purpose trust company and an Article XII investment company in limited liability company form, the issue of the necessity of an application for change of control of those entities under Sections 143-b and 519 of the Banking Law, respectively, arises. [ ] suggests that neither application is needed or, alternatively, that the Banking Board waive the requirement for same under Section 14(1)(p) of the Banking Law.
The reorganization of [ ]into [ ] will not result in any substantive change in the operation or control of the two entities under our jurisdiction. Additionally, the criteria for approving the change of control applications have, in effect, already been satisfied by virtue of the Department's (and Banking Board's) approval of the Organization Certificate of both these entities, at which time [ ] and its individual partners were scrutinized for compliance with those criteria. This scrutinization has continued in the course of the supervision and examination of the [ ] subsidiaries regulated by the Department.
Considering the foregoing, I recommend that [ ] incorporation be viewed as a structural reorganization which should be not deemed to lead to an acquisition of "control", as that term is defined in Sections143-b and 519. However, [ ] should be notified that no individual investor or combination of investors acting in concert may acquire 10% or more of the stock of [ ] without the prior approval of the Banking Board (143-b) and the Superintendent (519).