Goto Section: 1.993 | 1.1101 | Table of Contents
FCC 1.994
Revised as of October 2, 2015
Goto Year:2014 |
2016
§ 1.994 Routine terms and conditions.
Foreign ownership rulings issued pursuant to § § 1.990 et seq. shall be
subject to the following terms and conditions, except as otherwise specified
in a particular ruling:
(a)(1) Aggregate allowance for rulings issued under § 1.990(a)(1). In
addition to the foreign ownership interests approved specifically in a
licensee's declaratory ruling issued pursuant to § 1.990(a)(1), the
controlling U.S.-organized parent named in the ruling (or a U.S.-organized
successor-in-interest formed as part of a pro forma reorganization) may be
100 percent owned, directly and/or indirectly through one or more U.S- or
foreign-organized entities, on a going-forward basis (i.e., after issuance
of the ruling) by other foreign investors without prior Commission approval.
This “100 percent aggregate allowance” is subject to the requirement that
the licensee seek and obtain Commission approval before any foreign
individual, entity, or “group” not previously approved acquires, directly
and/or indirectly, more than five percent of the U.S. parent's outstanding
capital stock (equity) and/or voting stock, or a controlling interest, with
the exception of any foreign individual, entity, or “group” that acquires an
equity and/or voting interest of ten percent or less, provided that the
interest is exempt under § 1.991(i)(3).
(2) Aggregate allowance for rulings issued under § 1.990(a)(2). In addition
to the foreign ownership interests approved specifically in a licensee's
declaratory ruling issued pursuant to § 1.990(a)(2), the licensee(s) named in
the ruling (or a U.S.-organized successor-in-interest formed as part of a
pro forma reorganization) may be 100 percent owned on a going forward basis
(i.e., after issuance of the ruling) by other foreign investors holding
interests in the licensee indirectly through U.S.-organized entities that do
not control the licensee, without prior Commission approval. This “100
percent aggregate allowance” is subject to the requirement that the licensee
seek and obtain Commission approval before any foreign individual, entity,
or “group” not previously approved acquires directly and/or indirectly,
through one or more U.S.-organized entities that do not control the
licensee, more than five percent of the licensee's outstanding capital stock
(equity) and/or voting stock, with the exception of any foreign individual,
entity, or “group” that acquires an equity and/or voting interest of ten
percent or less, provided that the interest is exempt under § 1.991(i)(3).
Foreign ownership interests held directly in a licensee shall not be
permitted to exceed an aggregate 20 percent of the licensee's equity and/or
voting interests.
Note to paragraph (a): Licensees have an obligation to monitor and stay
ahead of changes in foreign ownership of their controlling U.S.-organized
parent companies (for rulings issued pursuant to § 1.990(a)(1)) and/or in the
licensee itself (for rulings issued pursuant to § 1.990(a)(2)), to ensure
that the licensee obtains Commission approval before a change in foreign
ownership renders the licensee out of compliance with the terms and
conditions of its declaratory ruling(s) or the Commission's rules.
Licensees, their controlling parent companies, and other entities in the
licensee's vertical ownership chain may need to place restrictions in their
bylaws or other organizational documents to enable the licensee to ensure
compliance with the terms and conditions of its declaratory ruling(s) and
the Commission's rules.
Example 1 (for rulings issued under § 1.990(a)(1)). U.S. Corp. files an
application for a common carrier license. U.S. Corp. is wholly owned and
controlled by U.S. Parent, which is a newly formed, privately held Delaware
corporation in which no single shareholder has de jure or de facto control.
A shareholders' agreement provides that a five-member board of directors
shall govern the affairs of the company; five named shareholders shall be
entitled to one seat and one vote on the board; and all decisions of the
board shall be determined by majority vote. The five named shareholders and
their respective equity interests are as follows: Foreign Entity A, which is
wholly owned and controlled by a foreign citizen (5 percent); Foreign Entity
B, which is wholly owned and controlled by a foreign citizen (10 percent);
Foreign Entity C, a foreign public company with no controlling shareholder
(20 percent); Foreign Entity D, a foreign pension fund that is controlled by
a foreign citizen and in which no individual or entity has a pecuniary
interest exceeding one percent (21 percent); and U.S. Entity E, a U.S.
public company with no controlling shareholder (25 percent). The remaining
19 percent of U.S. Parent's shares are held by three foreign-organized
entities as follows: F (4 percent), G (6 percent), and H (9 percent). Under
the shareholders' agreement, voting rights of F, G, and H are limited to the
minority shareholder protections listed in § 1.991(i)(5). Further, the
agreement expressly prohibits G and H from becoming actively involved in the
management or operation of U.S. Parent and U.S. Corp.
As required by the rules, U.S. Corp. files a section 310(b)(4) petition
concurrently with its application. The petition identifies and requests
specific approval for the ownership interests held in U.S. Parent by Foreign
Entity A and its sole shareholder (5 percent equity and 20 percent voting
interest); Foreign Entity B and its sole shareholder (10 percent equity and
20 percent voting interest), Foreign Entity C (20 percent equity and 20
percent voting interest), and Foreign Entity D (21 percent equity and 20
percent voting interest) and its fund manager (20 percent voting interest).
The Commission's ruling specifically approves these foreign interests. The
ruling also provides that, on a going-forward basis, U.S. Parent may be 100
percent owned in the aggregate, directly and/or indirectly, by other foreign
investors, subject to the requirement that U.S. Corp. seek and obtain
Commission approval before any previously unapproved foreign investor
acquires more than five percent of U.S. Parent's equity and/or voting
interests, or a controlling interest, with the exception of any foreign
investor that acquires an equity and/or voting interest of ten percent or
less, provided that the interest is exempt under § 1.991(i)(3).
In this case, foreign entities F, G, and H would each be considered a
previously unapproved foreign investor (along with any new foreign
investors). However, prior approval for F, G and H would only apply to an
increase of F's interest above five percent (because the ten percent
exemption under § 1.991(i)(3) does not apply to F) or to an increase of G's
or H's interest above ten percent (because G and H do qualify for this
exemption). U.S. Corp. would also need Commission approval before Foreign
Entity D appoints a new fund manager that is a non-U.S. citizen and before
Foreign Entities A, B, C, or D increase their respective equity and/or
voting interests in U.S. Parent, unless the petition previously sought and
obtained Commission approval for such increases (up to non-controlling 49.99
percent interests). (See § 1.991(k)(2).) Foreign shareholders of Foreign
Entity C and U.S. Entity E would also be considered previously unapproved
foreign investors. Thus, Commission approval would be required before any
foreign shareholder of Foreign Entity C or U.S. Entity E acquires (1) a
controlling interest in either company; or (2) a non-controlling equity
and/or voting interest in either company that, when multiplied by the
company's equity and/or voting interests in U.S. Parent, would exceed 5
percent of U.S. Parent's equity and/or voting interests, unless the interest
is exempt under § 1.991(i)(3).
Example 2 (for rulings issued under § 1.990(a)(2)). Assume that the following
three U.S.-organized entities hold non-controlling equity and voting
interests in common carrier Licensee, which is a privately held corporation
organized in Delaware: U.S. corporation A (30 percent); U.S. corporation B
(30 percent); and U.S. corporation C (40 percent). Licensee's shareholders
are wholly owned by foreign individuals X, Y, and Z, respectively. Licensee
has received a declaratory ruling under § 1.990(a)(2) specifically approving
the 30 percent foreign ownership interests held in Licensee by each of X and
Y (through U.S. corporation A and U.S. corporation B, respectively) and the
40 percent foreign ownership interest held in Licensee by Z (through U.S.
corporation C). On a going-forward basis, Licensee may be 100 percent owned
in the aggregate by X, Y, Z, and other foreign investors holding interests
in Licensee indirectly, through U.S.-organized entities that do not control
Licensee, subject to the requirement that Licensee obtain Commission
approval before any previously unapproved foreign investor acquires more
than five percent of Licensee's equity and/or voting interests, with the
exception of any foreign investor that acquires an equity and/or voting
interest of ten percent or less, provided that the interest is exempt under
§ 1.991(i)(3). In this case, any foreign investor other than X, Y, and Z
would be considered a previously unapproved foreign investor. Licensee would
also need Commission approval before X, Y, or Z increases its equity and/or
voting interests in Licensee unless the petition previously sought and
obtained Commission approval for such increases (up to non-controlling 49.99
percent interests). (See § 1.991(k)(2).)
(b) Subsidiaries and affiliates. A foreign ownership ruling issued to a
licensee shall cover it and any U.S.-organized subsidiary or affiliate, as
defined in § 1.990(d), whether the subsidiary or affiliate existed at the
time the ruling was issued or was formed or acquired subsequently, provided
that the foreign ownership of the licensee named in the ruling, and of the
subsidiary and/or affiliate, remains in compliance with the terms and
conditions of the licensee's ruling and the Commission's rules.
(1) The subsidiary or affiliate of a licensee named in a foreign ownership
ruling issued under § 1.990(a)(1) may rely on that ruling for purposes of
filing its own application for an initial common carrier or aeronautical
license or spectrum leasing arrangement, or an application to acquire such
license or spectrum leasing arrangement by assignment or transfer of control
provided that the subsidiary or affiliate, and the licensee named in the
ruling, each certifies in the application that its foreign ownership is in
compliance with the terms and conditions of the foreign ownership ruling and
the Commission's rules.
(2) The subsidiary or affiliate of a licensee named in a foreign ownership
ruling issued under § 1.990(a)(2) may rely on that ruling for purposes of
filing its own application for an initial common carrier radio station
license or spectrum leasing arrangement, or an application to acquire such
license or spectrum leasing arrangement by assignment or transfer of control
provided that the subsidiary or affiliate, and the licensee named in the
ruling, each certifies in the application that its foreign ownership is in
compliance with the terms and conditions of the foreign ownership ruling and
the Commission's rules.
(3) The certifications required by paragraphs (b)(1) and (b)(2) of this
section shall also include the citation(s) of the relevant ruling(s) (i.e.,
the DA or FCC Number, FCC Record citation when available, and release date).
(c) Insertion of new controlling foreign-organized companies. (1) Where a
licensee's foreign ownership ruling specifically authorizes a named, foreign
investor to hold a controlling interest in the licensee's controlling
U.S.-organized parent, for rulings issued under § 1.990(a)(1), or in an
intervening U.S.-organized entity that does not control the licensee, for
rulings issued under § 1.990(a)(2), the ruling shall permit the insertion of
new, controlling foreign-organized companies in the vertical ownership chain
above the controlling U.S. parent, for rulings issued under § 1.990(a)(1), or
above an intervening U.S.-organized entity that does not control the
licensee, for rulings issued under § 1.990(a)(2), without prior Commission
approval provided that any new foreign-organized company(ies) are under 100
percent common ownership and control with the foreign investor approved in
the ruling.
(2) Where a previously unapproved foreign-organized entity is inserted into
the vertical ownership chain of a licensee, or its controlling
U.S.-organized parent, without prior Commission approval pursuant to
paragraph (c)(1) of this section, the licensee shall file a letter to the
attention of the Chief, International Bureau, within 30 days after the
insertion of the new, foreign-organized entity. The letter must include the
name of the new, foreign-organized entity and a certification by the
licensee that the entity complies with the 100 percent common ownership and
control requirement in paragraph (c)(1) of this section. The letter must
also reference the licensee's foreign ownership ruling(s) by IBFS File No.
and FCC Record citation, if available. This letter notification need not be
filed if the ownership change is instead the subject of a pro forma
application or pro forma notification already filed with the Commission
pursuant to the relevant wireless radio service rules or satellite radio
service rules applicable to the licensee.
(3) Nothing in this section is intended to affect any requirements for prior
approval under 47 U.S.C. 310(d) or conditions for forbearance from the
requirements of 47 U.S.C. 310(d) pursuant to 47 U.S.C. 160.
Example (for rulings issued under § 1.990(a)(1)). Licensee receives a foreign
ownership ruling under § 1.990(a)(1) that authorizes its controlling,
U.S.-organized parent (“U.S. Parent A”) to be wholly owned and controlled by
a foreign-organized company (“Foreign Company”). Foreign Company is minority
owned (20 percent) by U.S.-organized Corporation B, with the remaining 80
percent controlling interest held by Foreign Citizen C. After issuance of
the ruling, Foreign Company forms a wholly-owned, foreign-organized
subsidiary (“Foreign Subsidiary”) to hold all of Foreign Company's shares in
U.S. Parent A. There are no other changes in the direct or indirect foreign
ownership of U.S. Parent A. The insertion of Foreign Subsidiary into the
vertical ownership chain between Foreign Company and U.S. Parent A would not
require prior Commission approval, except for any approval otherwise
required pursuant to section 310(d) of the Communications Act and not exempt
therefrom as a pro forma transfer of control under § 1.948(c)(1).
Example (for rulings issued under § 1.990(a)(2)). An applicant for a common
carrier license receives a foreign ownership ruling under § 1.990(a)(2) that
authorizes a foreign-organized company (“Foreign Company”) to hold a
non-controlling 44 percent equity and voting interest in the applicant
through Foreign Company's wholly-owned, U.S.-organized subsidiary, U.S.
Corporation A, which holds the non-controlling 44 percent interest directly
in the applicant. The remaining 56 percent of the applicant's equity and
voting interests are held by its controlling U.S.-organized parent, which
has no foreign ownership. After issuance of the ruling, Foreign Company
forms a wholly-owned, foreign-organized subsidiary to hold all of Foreign
Company's shares in U.S. Corporation A. There are no other changes in the
direct or indirect foreign ownership of U.S. Corporation A. The insertion of
the foreign-organized subsidiary into the vertical ownership chain between
Foreign Company and U.S. Corporation A would not require prior Commission
approval.
(d) Insertion of new non-controlling foreign-organized companies. (1) Where
a licensee's foreign ownership ruling specifically authorizes a named,
foreign investor to hold a non-controlling interest in the licensee's
controlling U.S.-organized parent, for rulings issued under § 1.990(a)(1), or
in an intervening U.S.-organized entity that does not control the licensee,
for rulings issued under § 1.990(a)(2), the ruling shall permit the insertion
of new, foreign-organized companies in the vertical ownership chain above
the controlling U.S. parent, for rulings issued under § 1.990(a)(1), or above
an intervening U.S.-organized entity that does not control the licensee, for
rulings issued under § 1.990(a)(2), without prior Commission approval
provided that any new foreign-organized company(ies) are under 100 percent
common ownership and control with the foreign investor approved in the
ruling.
Note to paragraph (d)(1): Where a licensee has received a foreign ownership
ruling under § 1.990(a)(2) and the ruling specifically authorizes a named,
foreign investor to hold a non-controlling interest directly in the licensee
(subject to the 20 percent aggregate limit on direct foreign investment),
the ruling shall permit the insertion of new, foreign-organized companies in
the vertical ownership chain of the approved foreign investor without prior
Commission approval provided that any new foreign-organized companies are
under 100 percent common ownership and control with the approved foreign
investor.
Example (for rulings issued under § 1.990(a)(1)). Licensee receives a foreign
ownership ruling under § 1.990(a)(1) that authorizes a foreign-organized
company (“Foreign Company”) to hold a non-controlling 30 percent equity and
voting interest in Licensee's controlling, U.S.-organized parent (“U.S.
Parent A”). The remaining 70 percent equity and voting interests in U.S.
Parent A are held by U.S.-organized entities which have no foreign
ownership. After issuance of the ruling, Foreign Company forms a
wholly-owned, foreign-organized subsidiary (“Foreign Subsidiary”) to hold
all of Foreign Company's shares in U.S. Parent A. There are no other changes
in the direct or indirect foreign ownership of U.S. Parent A. The insertion
of Foreign Subsidiary into the vertical ownership chain between Foreign
Company and U.S. Parent A would not require prior Commission approval.
Example (for rulings issued under § 1.990(a)(2)). Licensee receives a foreign
ownership ruling under § 1.990(a)(2) that authorizes a foreign-organized
entity (“Foreign Company”) to hold approximately 24 percent of Licensee's
equity and voting interests, through Foreign Company's non-controlling 48
percent equity and voting interest in a U.S.-organized entity, U.S.
Corporation A, which holds a non-controlling 49 percent equity and voting
interest directly in Licensee. A U.S. citizen holds the remaining 52 percent
equity and voting interests in U.S. Corporation A, and the remaining 51
percent equity and voting interests in Licensee are held by its
U.S.-organized parent, which has no foreign ownership. After issuance of the
ruling, Foreign Company forms a wholly-owned, foreign-organized subsidiary
(“Foreign Subsidiary”) to hold all of Foreign Company's shares in U.S.
Corporation A. There are no other changes in the direct or indirect foreign
ownership of U.S. Corporation A. The insertion of Foreign Subsidiary into
the vertical ownership chain between Foreign Company and U.S. Corporation A
would not require prior Commission approval.
(2) Where a previously unapproved foreign-organized entity is inserted into
the vertical ownership chain of a licensee, or its controlling
U.S.-organized parent, without prior Commission approval pursuant to
paragraph (d)(1) of this section, the licensee shall file a letter to the
attention of the Chief, International Bureau, within 30 days after the
insertion of the new, foreign-organized entity. The letter must include the
name of the new, foreign-organized entity and a certification by the
licensee that the entity complies with the 100 percent common ownership and
control requirement in paragraph (d)(1) of this section. The letter must
also reference the licensee's foreign ownership ruling(s) by IBFS File No.
and FCC Record citation, if available. This letter notification need not be
filed if the ownership change is instead the subject of a pro forma
application or pro forma notification already filed with the Commission
pursuant to the relevant wireless radio service rules or satellite radio
service rules applicable to the licensee.
(e) New petition for declaratory ruling required. A licensee that has
received a foreign ownership ruling, including a U.S.-organized
successor-in-interest to such licensee formed as part of a pro forma
reorganization, or any subsidiary or affiliate relying on such licensee's
ruling pursuant to paragraph (b) of this section, shall file a new petition
for declaratory ruling under § 1.990 to obtain Commission approval before its
foreign ownership exceeds the routine terms and conditions of this section,
and/or any specific terms or conditions of its ruling.
(f)(1) Continuing compliance. If at any time the licensee, including any
successor-in-interest and any subsidiary or affiliate as described in
paragraph (b) of this section, knows, or has reason to know, that it is no
longer in compliance with its foreign ownership ruling or the Commission's
rules relating to foreign ownership, it shall file a statement with the
Commission explaining the circumstances within 30 days of the date it knew,
or had reason to know, that it was no longer in compliance therewith.
Subsequent actions taken by or on behalf of the licensee to remedy its
non-compliance shall not relieve it of the obligation to notify the
Commission of the circumstances (including duration) of non-compliance. Such
licensee and any controlling companies, whether U.S.- or foreign-organized,
shall be subject to enforcement action by the Commission for such
non-compliance, including an order requiring divestiture of the investor's
direct and/or indirect interests in such entities.
(2) Any individual or entity that, directly or indirectly, creates or uses a
trust, proxy, power of attorney, or any other contract, arrangement, or
device with the purpose or effect of divesting itself, or preventing the
vesting, of an equity interest or voting interest in the licensee, or in a
controlling U.S. parent company, as part of a plan or scheme to evade the
application of the Commission's rules or policies under section 310(b) shall
be subject to enforcement action by the Commission, including an order
requiring divestiture of the investor's direct and/or indirect interests in
such entities.
[ 78 FR 41321 , July 10, 2013, as amended at 78 FR 44029 , July 23, 2013]
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Subpart G—Schedule of Statutory Charges and Procedures for Payment
Source: 52 FR 5289 , Feb. 20, 1987, unless otherwise noted.
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Goto Section: 1.993 | 1.1101
Goto Year: 2014 |
2016
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