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Avoiding common Hart-Scott-Rodino (HSR) filing mistakes

The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), requires that all qualifying mergers, acquisitions, and joint venture formations be reported to the US federal antitrust agencies before they can close. Failing to file, or the submission of an inaccurate HSR form, can result in severe civil penalties up to $42,530 for each day of the violation.

Typically, both the buyer and the seller must submit their own HSR forms, at which point a mandatory waiting period begins. Parties generally coordinate filing submissions to avoid delays, but if either entity submits a deficient or inaccurate HSR form, the transaction may be delayed.

As a result, it is critical to give your transaction the best chance of closing promptly by knowing and avoiding common HSR filing mistakes.

Don’t assume

To avoid mistakes, ensure you use the HSR control rules for conducting the ultimate parent entity (UPE) analysis to determine both merging parties’ UPEs accurately.

Determine whether the size-of-person threshold is met

HSR rules offer strict guidelines to help determine whether your transaction meets the size-of-person threshold that triggers a filing. The size-of-person test applies when the size of the transaction is between $90 million and $359.9 million. Additional conditions apply, including a good faith determination of fair market value done by the acquiring UPE’s board of directors or its delegee.

Pay attention to Items 4(c) and 4 (d)

Ensure a complete search is performed for documents responsive to Items 4(c) and 4 (d), which evaluate or analyze the acquisition and discuss certain topics. To be responsive, documents submitted generally must have been prepared or received by officers or directors. Confirm that a list of directors and Item 4(c) officers is prepared, so the proper individual’s files are searched.

Communicate with general counsel

Communicating with HSR counsel for the other merging party helps ensure filings are submitted at the same time, avoiding delays to the waiting period. Pay attention to the status of the other party’s collection and review of Item 4(c) and 4 (d) documents and be prepared to navigate delays that can arise if one party has substantially more documents to review than the other.

Beware of penalties

Check, double-check, and triple-check your filing. If the form is not accurate or complete, the agencies will generally reject the filing and restart the HSR waiting period. Failure to file or submission of an inaccurate HSR form can result in civil penalties of up to $42,530 for each day of the violation.

Determine if HSR exemptions apply

Make sure you determine whether HSR exemptions apply and properly apply those exemptions to your filing – including the narrowly available, investment-only exemption. Certain activities, such as nominating someone for the target’s board of directors and soliciting proxies, among others, render the exemption unavailable.

Pay the filing fee

Paying the appropriate HSR filing fee is critical. The acquiring UPE must pay the lowest current filing fee of $45,000 for a transaction valued in excess of the current minimum threshold of $90 million but less than $180 million. Refer to Practical Law Toolkit, HSR Valuation for further guidance.

Be vigilant

If you’re having trouble getting the necessary information, advise your organization on the risks of not submitting complete and accurate documentation. Recent HSR Act enforcement actions have resulted in fines as high as $4 million for violations.

Avoid costly HSR mistakes with the help of Practical Law

Leverage Thomson Reuters Practical Law’s practical guidance and wisdom to avoid costly mistakes.

Over 280 expert attorney-editors obsessively monitor the changes in the law to ensure you have up-to-date resources on HSR and can help you determine whether a premerger notification is required under the Hart-Scott-Rodino (HSR) Act.

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