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In any event, for the purposes of completeness, we consider
petitioners’ contention on the merits. We conclude that the
outcome is the same because, as discussed next, Burndy-Japan was
not a CFC of Burndy-US in either form or substance.
b. Power of Any Burndy-Japan Shareholder To Block
Various Actions by Burndy-Japan
The articles of incorporation require a vote of shareholders
holding more than 80 percent of the stock to: (1) Amend the
articles of incorporation; (2) elect directors and auditors;
(3) change capital; (4) assign the entire or an essential part of
the business of the company; (5) entrust a third party with
management; (6) dispose of profits; (7) acquire or dispose of
shares of other companies; and (8) make or alter license
agreements. Under the 1973 basic agreement, Burndy-US, Furukawa,
and Sumitomo each had the power to veto six important categories
of decisions by Burndy-Japan: (1) Changes in capital; (2)
changes in license agreements; (3) acquisition or sale of shares
in other companies; (4) payment of dividends; (5) transfer of a
major part of the business; and (6) entrusting management to a
third party.
The six veto powers and the 80-percent supermajority
requirements permitted either Furukawa or Sumitomo to block a
wide range of important actions by Burndy-Japan. We believe the
veto powers and supermajority requirements were among the factors
that prevented Burndy-US from controlling Burndy-Japan in 1992.
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