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2. Whether Burndy-US Owned More Than 50 Percent of the
Total Combined Voting Power of the Stock of Burndy-
Japan
Petitioners contend that Burndy-US owned more than 50
percent of the total combined voting power of Burndy-Japan
because Burndy-US owned 50 percent of the stock of Burndy-Japan
and, according to petitioners, had the following powers:
(a) Burndy-US could select Burndy-Japan’s board of directors and
president and control the board’s tie-breaking vote; (b) Burndy-
US could dissolve Burndy-Japan; and (c) Burndy-US had management
control of Burndy-Japan. Petitioners point out that neither
Furukawa nor Sumitomo exercised the veto powers created by the
1973 agreement and contend that Burndy-US paid Furukawa and
Sumitomo a control premium in 1973 when Burndy-US obtained 50
percent of the stock of Burndy-Japan.
a. Petitioners May Not Rely on the Doctrine of
Substance Over Form
In 1973, Burndy-US, Sumitomo and Furukawa changed the
structure of their ownership of Burndy-Japan so that Burndy-US
would own 50 percent of the stock of Burndy-Japan and the two
other Japanese companies would each own 25 percent. It is clear
that this change did not give Burndy-US more than 50 percent of
the voting power of Burndy-Japan if “voting power” refers to the
shareholders’ percentage of stock ownership. Nonetheless,
petitioners now contend that Burndy-US owned more than 50 percent
of the voting power of Burndy-Japan.
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