Executive Compensation Professionals Do Not Come Across the HSR Act Often

March 17, 2020

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Are you familiar with the Hart-Scott-Rodino (HSR) Act? Although it is designed to cover large mergers and acquisitions, it can come in to play for select individuals. When the executive compensation plans of highly compensated employees rely heavily on corporate stock to reward the executive, the reporting guidelines of HSR can potentially apply at the individual level.

In describing the HSR Act, the Federal Trade Commission explains that the HSR Act “established the federal premerger notification program, which provides the FTC[i] and the Department of Justice with information about large mergers and acquisitions before they occur.”

Barbara Baska, in a blog post titled, “New HSR Thresholds Announced for 2020” (published on, addressed the updated HSR Act filing thresholds. Calling the HSR Act a “trap for the unwary[ii]” Barbara Baska points out that the HSR Act applies to individuals as well as corporations and reminds individuals with corporate stock in excess of $376 million (the new threshold established on January 28, 2020) that they are required to file under the HSR Act, while those with company stock of less than $94 million are not.

Obviously, this unique result of corporations relying heavily on company stock to reward top executives does not apply to a large number of people. However, for executives or board members at or near the stock ownership thresholds defined by the HSR Act, failure to file can result in penalties in excess of $40,000 per day[iii].

You can read Barbara Baska’s comments in full by following the link below, referenced in the blog post from Attorney Mike Melbinger. Mike shared his insights on the HSR filing requirements in his blog, “HSR Thresholds Adjusted for 2020,” which is published here in entirety.

From the Executive Compensation Blog, 3-2-2020

“Executive compensation professionals do not come across the Hart-Scott-Rodino Act often. However, it does come up in certain circumstances, as evidenced by the occasional enforcement actions by the DOJ[iv] and FTC[v] against a corporate director or executive, so executive compensation professionals need to be aware of the possibility.

“The Hart-Scott-Rodino Act is part of antitrust law (thus, the FTC involvement). The HSR Act generally applies to mergers, acquisitions, and joint ventures that exceed a minimum value threshold (the size-of-transaction test) and, in some cases, an additional threshold based on the size of each party (the size-of-person test).  But the HSR reporting requirements, by their terms, apply to any acquisitions of equity, including the granting or vesting of compensatory equity awards.

“The reason we do not encounter the HSR reporting rules often is because the filing thresholds are quite high. However, some directors and executives, generally a company founder or significant individual investor, will attain those thresholds. Today’s blog is simply to point out that the HSR Act thresholds are adjusted annually and were recently adjusted for 2020, as described in Barb’s blog post:

“As announced by the FTC on January 28, effective February 27 the thresholds are as follows:

  • Individuals with company stock holdings of less than $94 million are not required to make filings under the HSR Act (up from $90 million in 2019).
  • Individuals with company stock holdings in excess of $376 million are required to make filings under the HSR Act (up from $359.9 million in 2019).

If the individual’s holdings are between the above two thresholds, their acquisition is reportable under the HSR Act if one party to the transaction has assets in excess of $18.8 million and the other party had assets of exceeding $188 million (up from $18 million and $180 million, respectively).”

Reminder from Fulcrum Partners: Numerous scenarios exist in which the issuance of equity could trigger the need for an HSR filing on behalf of an individual. These scenarios include but are not limited to stock purchases under an employee stock purchase plan, option exercises and other actions, all of which signal the need for the corporation and the individual involved to seek professional guidance.

[i] Federal Trade Commission



[iv] Department of Justice

#m&a #executivecomp #HSRAct #mergersandacquisitions

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

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Lion Street Advisors // Lion Street Financial

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