| September 4, 1996 |
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Michael K. O'Neal, Esq. Dear Mr. O'Neal: This is in response to your letter of June 24, 1996, addressed to the General Counsel requesting a determination that the contemplated transfer of common stock of [word(s) deleted] ("Bancshares"), to a family limited partnership ("FLP") would not require prior approval of the Board under section 3 of the Bank Holding Company Act ("BHC Act"). FLP is a company for purposes of the BHC Act.
On the basis of your letter and subsequent correspondence and discussions with Board staff, staff understands the facts to be as follows.
[Name deleted] directly owns approximately 15.79 percent of the common stock of Bancshares. [Name deleted] is also the sole trustee of certain trusts, established for the benefit of his children, that together own 42.37 percent of the common stock of Bancshares. These trusts are testamentary trusts that expire within 21 years and a life in being. [Name deleted] thereby has the sole power to vote 58.16 percent of the common stock of Bancshares. For estate planning and tax purposes, [name deleted] wishes to transfer 7.98 percent of the common stock of Bancshares from his personal account and from three of the trusts to the FLP.1 The only partners in the FLP would be [name deleted] and three of the trusts that currently own common stock of Bancshares, and [name deleted] would become the sole general partner of the FLP with sole voting control over the stock. The FLP would own no property other than the stock of Bancshares. Following the proposed transfers, [name deleted] would continue to own personally, or have the power to vote as sole trustee through his role as trustee of the trusts established for the benefit of his children, over 50 percent of the common stock of Bancshares. [Name deleted] has committed that he will not decrease the percent of Bancshares common stock that he owns or has the power to vote as sole trustee without prior written notice to the Reserve Bank. FLP will not increase its ownership above 10 percent of the common stock of Bancshares without prior written notice to the Reserve Bank and, if necessary, approval under the CIBC Act or the BHC Act. On the basis of the foregoing and all the other facts of record, staff does not believe that the FLP would become a bank holding company after receiving the common stock of Bancshares. Accordingly, staff would not object to the transfer of common stock to the FLP as proposed without the filing of an application with the Board under the BHC Act. Additional features or terms, or different circumstances, could result in a different opinion, and any changes to the proposal or the surrounding circumstances should be presented to staff as soon as possible, and may require a new submission to staff and a revision of this opinion. In addition, this opinion is without prejudice to the Board's right to initiate a control proceeding under the BHC Act and Regulation Y in the event that facts presented in the future indicate that the FLP controls Bancshares for purposes of the BHC Act.
Sincerely,
(signed) Scott G. Alvarez
Scott G. Alvarez cc: Federal Reserve Bank of Dallas
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