31 C.F.R. Subpart B—Definitions
Title 31 - Money and Finance: Treasury
The term acquisition is used in these regulations to refer collectively to an acquisition, merger, or takeover. It includes, without limitation: (a) The acquisition of a person by: (1) The purchase of its voting securities, (2) The conversion of its convertible voting securities, (3) The acquisition of its convertible voting securities if that involves the acquisition of control, or (4) The acquisition and the voting of proxies, if that involves the acquisition of control. (b) The acquisition of a business, including any acquisition of production or research and development facilities operated prior to the acquisition as part of a business, if there will likely be a substantial use of: (1) The technology of that business, excluding technical information generally accompanying the sale of equipment, or (2) Personnel previously employed by that business. (c) A consolidation. Example (relating to paragraph (b) of this section). Corporation A, organized under the laws of a foreign state and wholly owned and controlled by a foreign national, acquires, from separate United States nationals, (a) products held in inventory, (b) land, and (c) machinery for export. Corporation A has not acquired a business and has not made an acquisition within the meaning of these regulations. An affiliate of an entity, as that term is used in §§800.205 and 800.402, is any other entity in the chain of ownership between a parent and that entity. Example. Corporation P holds 50 percent of the voting securities of Corporations R and S. Corporation R holds 40 percent of the voting securities of Corporation X, and Corporation S holds 50 percent of the voting securities of Corporation Y. Under this definition, Corporation S is an affiliate of Corporation Y. (An entity can be both an affiliate and a parent.) Corporation R is not an affiliate of Corporation S or Y because it is not in the chain of ownership between Corporation P and Corporation Y. Corporation X is also not an affiliate of Corporation Y. The term Committee means the Committee on Foreign Investment in the United States, as established in Executive Order No. 11858, 40 FR 20263, 3 CFR, 1971–1975 Comp., p. 990, as amended. The Chairman of the Committee is the Secretary of the Treasury. (a) The term control means the power, direct or indirect, whether or not exercised, and whether or not exercised or exercisable through the ownership of a majority or a dominant minority of the total outstanding voting securities of an issuer, or by proxy voting, contractual arrangements or other means, to determine, direct or decide matters affecting an entity; in particular, but without limitation, to determine, direct, take, reach or cause decisions regarding: (1) The sale, lease, mortgage, pledge or other transfer of any or all of the principal assets of the entity, whether or not in the ordinary course of business; (2) The dissolution of the entity; (3) The closing and/or relocation of the production or research and development facilities of the entity; (4) The termination or non-fulfillment of contracts of the entity; or (5) The amendment of the Articles of Incorporation or constituent agreement of the entity with respect to the matters described at paragraph (a) (1) through (4) of this section. (b) In examining questions of control in situations where more than one foreign person has an interest in a U.S. person, consideration will be given to factors such as whether the foreign persons are related and/or whether they have commitments to act in concert. The term conversion means the exercise of a right inherent in the ownership or holding of particular securities to exchange such securities for securities which currently entitle the owner or holder to vote for directors of the issuer or of any affiliate of the issuer. The term convertible voting security means a security which currently does not entitle its owner or holder to vote for directors of any entity and which is convertible into a voting security. See §§800.201 and 800.302(c). The term effective date means August 23, 1988, the date section 721 became effective. The term engage in, as used in the phrase seeks to engage in any merger, acquisition or takeover in section 721(b), means seeks to acquire control through. [59 FR 27179, May 25, 1994] The term entity means any branch, partnership, associated group, association, estate, trust, corporation, division of a corporation, business enterprise, or other organization (whether or not organized under the laws of any State), and any government (including a foreign government, the United States Government, a State or local government, and any agency, corporation, financial institution, or other entity or instrumentality thereof, including a government sponsored agency). [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The term foreign government means any government or body exercising governmental functions, other than the government of the United States, a State of the United States, or a political subdivision of the United States or a State. The term includes but is not limited to national, state, provincial and municipal governments, including their respective departments, agencies, government-owned enterprises and other agencies and instrumentalities. [59 FR 27179, May 25, 1994] The term foreign interest means any foreign person, including a foreign government. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The term foreign national means any natural person other than a United States national. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The term foreign person means (a) Any foreign national or (b) Any entity over which control is exercised or exercisable by a foreign interest. Example 1. Corporation A is organized under the laws of a foreign state and is engaged in business outside the United States. All its shares are held by Corporation X, which controls Corporation A. Corporation X is organized in the United States, and is wholly owned and controlled by U.S. nationals. Corporation A, although organized and operating outside the U.S., is not a “foreign person,” and its acquisition of a U.S. person would not be subject to section 721. Example 2. Same facts as in the first two sentences of Example 1, except that Country A through governmental intervenors exercises full decision-making power over Corporation A, including the decisions described in §800.204 (a) through (e). There is a foreign interest which is exercising control over Corporation A, which is a “foreign person.” Example 3. Corporation A is organized under the laws of a foreign state and is owned and controlled by a foreign national. Through a branch, Corporation A engages in business in the United States. Corporation A and/or its branch is a “foreign person” should Corporation A make an acquisition. Its branch business in the United States is also a “U.S. person” which may be the subject of an acquisition. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The terms hold(s) and holding mean legal or beneficial ownership, whether direct or indirect, through fiduciaries, agents or other means. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The term parent, as used in §§800.302 and 800.402, means a person who or which, directly or indirectly, (a) Holds or will hold 50 percent or more of the outstanding voting securities of an entity; or (b) In case of an entity that has no outstanding voting securities, holds or will hold the right to 50 percent or more of the profits of the entity, or has or will have the right in the event of the dissolution to 50 percent or more of the assets of the entity. Example. Corporation P holds 50 percent of the voting securities of Corporations R and S. Corporation R holds 40 percent of the voting securities of Corporation X, and Corporation S holds 50 percent of the voting securities of Corporation Y. Corporation P is a parent of Corporations R, S and Y, but not of Corporation X. Corporation S is a parent of Corporation Y because it holds 50 percent of the voting securities of Corporation Y. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The terms party to an acquisition and parties to an acquisition mean: (a) In the case of an acquisition of a person by the purchase of its voting securities, the person acquiring the voting securities, and the person issuing those voting securities; (b) In the case of a merger, the surviving person, and the person or persons that lose its or their separate pre-merger identity; (c) In the case of an acquisition of an entity or a business of an entity, the person acquiring or seeking to acquire that entity or business, and the person selling that entity or business; (d) In the case of a consolidation, the entities being consolidated, and the new consolidated entity; (e) In the case of a proxy solicitation, the person soliciting proxies, and the person who issued the voting securities. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The term person means any natural person or entity. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The term Section 721 means section 721 of title VII of the Defense Production Act of 1950, 50 U.S.C. App. 2171, as added by section 5021 of the Omnibus Trade and Competitiveness Act of 1988, Public Law 100–418, 102 Stat. 1107. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] (a) Voting securities are held or acquired “solely for the purpose of investment” if the person holding or acquiring such voting securities has no intention of determining or directing the basic business decisions of the issuer, including those at §800.204(a) (1) through (5). (b) Voting securities are not held solely for the purpose of investment if the person holding or acquiring such voting securities: (1) Possesses or develops any purpose other than investment, or (2) Takes any action inconsistent with acquiring or holding such securities solely for the purpose of investment. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The term United States means the United States of America, the States of the United States, the District of Columbia, and any commonwealth, territory, dependency, or possession of the United States, and includes the Outer Continental Shelf, as defined in section 2(a) of the Outer Continental Shelf Lands Act (43 U.S.C. 1131 (a)). For purposes of these regulations and their examples, an entity organized under the laws of the United States of America, one of the States, the District of Columbia, or a commonwealth, territory, dependency or possession of the United States, is an entity organized “in the United States.” [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The term United States national or U.S. national means a citizen of the United States or a natural person who, although not a citizen of the United States, owes permanent allegiance to the United States. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994] The term U.S. person or United States person means any natural person or entity but, in the case of the latter, only to the extent of its business activities in interstate commerce in the United States, irrespective of the nationality of the natural persons or entities which control it. Example 1. Corporation A is organized under the laws of a foreign state and is wholly owned and controlled by a foreign national. It engages in business activities in a state of the U.S. through a branch office or subsidiary. That branch office or subsidiary of Corporation A is an “entity” and a “U.S. person.” The branch office or subsidiary is also a foreign person under §800.213. Example 2. Same facts as in the first sentence of Example 1. Corporation A, however, does not have a branch office, subsidiary or fixed place of business in the United States. It exports and licenses technology to an unrelated company in the United States. Corporation A is not a “U.S. person.” Example 3. Corporation A is organized under the laws of a foreign state and is wholly owned and controlled by Corporation X. Corporation X is organized in the United States and is wholly owned and controlled by U.S. nationals. Corporation A does not have a branch office, subsidiary, or fixed place of business in the United States. It exports goods to Corporation X and to unrelated companies in the United States. The sale of Corporation A by Corporation X to a foreign person would not constitute an acquisition of a U.S. person for purposes of section 721. [56 FR 58780, Nov. 21, 1991. Redesignated and amended at 59 FR 27179, May 25, 1994] The term voting securities means any securities which at present or upon conversion entitle the owner or holder thereof to vote for the election of directors of the issuer, or, with respect to unincorporated entities, individuals exercising similar functions. [56 FR 58780, Nov. 21, 1991. Redesignated at 59 FR 27179, May 25, 1994]
Title 31: Money and Finance: Treasury
PART 800—REGULATIONS PERTAINING TO MERGERS, ACQUISITIONS, AND TAKEOVERS BY FOREIGN PERSONS
Subpart B—Definitions
§ 800.201 Acquisition.
§ 800.202 Affiliate.
§ 800.203 Committee; Chairman of the Committee.
§ 800.204 Control.
§ 800.205 Conversion.
§ 800.206 Convertible voting security.
§ 800.207 Effective date.
§ 800.208 Engage in.
§ 800.209 Entity.
§ 800.210 Foreign government.
§ 800.211 Foreign interest.
§ 800.212 Foreign national.
§ 800.213 Foreign person.
§ 800.214 Hold.
§ 800.215 Parent.
§ 800.216 A party or parties to an acquisition.
§ 800.217 Person.
§ 800.218 Section 721.
§ 800.219 Solely for the purpose of investment.
§ 800.220 United States.
§ 800.221 United States national.
§ 800.222 United States person.
§ 800.223 Voting securities.
