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  Staff Interpretation Letter 2006-41
Identification Number 850
This is in response to your correspondence regarding the potential applicability of the shareholder approval requirements of Marketplace Listing Rule 4350(i)(1) (the “Rule”) to a proposed restructuring (the “Restructuring”) which you described.
According to the information you provided, in the Restructuring, the company would issue shares of its common stock (the “Shares”) solely to certain of its directly or indirectly wholly-owned subsidiaries (the “Subsidiaries”).  One or more of the Subsidiaries would use certain of the Shares to acquire the equity interest of other wholly-owned subsidiaries of the company.  Because all of the Shares would be held by directly or indirectly wholly-owned subsidiaries of the company, the company would directly or indirectly hold all of the Shares both prior to and following the Restructuring.
You stated that the company does not intend to register the Shares with the Securities and Exchange Commission.  You also stated that, under the laws of the company’s state of incorporation, the Shares would not be permitted to be voted and would not be considered as outstanding for purposes of calculating the shares required to be present to form a quorum.  In addition, you stated that the Shares would be treated as treasury shares for purposes of generally accepted accounting principles, and, because they will be held by subsidiaries, the Shares would not be considered in calculating the company’s earnings per share.
Following our review of the information you submitted, we have determined that the Restructuring will not be subject to Listing Rule 4350(i)(1) because, for purposes of the Rule, we would not consider the Shares to be issued and outstanding.  This is based on your representations about the treatment of the shares for state law purposes and under generally accepted accounting principles.  Please be advised that any subsequent issuance of the Shares, whether by the company or the Subsidiaries, and any change in circumstances that could result in the Shares becoming outstanding, would need to be assessed under the Rule.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 850
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