During the year the Commission also granted or extended a number of exemptions under Sections 3 (a) (4), 3 (a) (5) and 3 (b) of the Act relating respectively to ter porary holding companies, foreign holding companies and foreign subsidiaries. 12/ Appendix Table 19 shows the number of applications received and disposed of under Sections 2 and 3 of the Act. 13/ Rules and Regulations There were comparatively few changes in the Rules and Regulations under the Holding Company Act during the past fiscal year. 14/ A change, in addition to that shown in the first footnote under Part II, in the rules to meet wartime conditions was an amendment to Rule U-7 (b), which defines an electric utility company for purposes of the Act. It exempts an industrial or other company which is not a subsidiary of a registered holding company, and which was not an electric utility company as of January 1, 1941, from being classified as an electric utility company by reason of any sales of surplus electric energy at wholesale during the existence of the national emergency, and for one year thereafter. 15/ During the year a new provision was adopted to deal with the problem of equitable allocation of taxes between various companies in a holding company system which may Join in filing a consolidated tax return. 16/ There was also a change, largely of an administrative character, in the Commission's Rules governing solicitation of security holders' authorizations regarding miscellaneous financial transactions. Under the amended rules, solicitations regarding a transaction which is itself the subject of Commission regulation are scrutinized in connection with the examination of other aspects of the proposed transaction. In cases where the solicitation is not part of a transaction subject to regulation (for example, solicitations in connection with an election of directors), the same rules are made applicable as have been adopted pursuant to the Securities Exchange Act for solicitation of proxies in respect of securities registered on a national securities exchange. 17/ A number of minor changes were made by way of simplification and clarification of the forms under the Holding Company Act. 18/ 12/ See Holding Company Act Release Nos. 3337, 3348, 3218, 3617, 3101, 3263, 2952, 2920, 3318 and 3263. 13/ This table also shows the number of applications and declarations, and the purpose thereof, received and disposed of under Sections other than the previously discussed Sections 6 and 7. 14/ Reference is made to the Seventh Annual Report of the Commission (pp. 115-117) for a description of the general character of the rules adopted under the Holding Company Act, and the relationship of the Commission's rule-making powers to the administration of the Act. 15/ Holding Company Act Release No. 3506, effective May 7, 1942. 16/ Rule U-45 (F) (6), Holding Company Act Release No. 2902, effective July 23, 1941. A later amendment was adopted to cover consolidated returns made under the Revenue Act of 1942. See Holding Company Act Release No. 4167. 17 Rules U-61 and U-62, effective July 15, 1941 and October 25, 1941, respectively. Holding Company Act Release Nos. 2836 and 3090. See Holding Company Act Release Nos. 2899, 3249 and 3257. After the close of the past fiscal year a substantial reduction was made in the amount of information required in the Annual Supplement to the Registration Statement which registered holding companies must file under the Holding Company Act. PART IV PARTICIPATION OF THE COMMISSION IN CORPORATE REORGANIZATIONS Summary of Activities The Commission actively participated in 148 reorganization proceedings involving the reorganization of 177 companies (148 principal debtor corporations and 29 subsidiary debtors). 1/ The aggregate stated assets of these 177 companies totaled approximately $2,044,933,000, and their aggregate indebtedness was approximately $1,317,556,000. For the first time the cases closed kept pace with the new cases in which the Commission filed a notice of appearance, there having been 34 of each during the year. The 114 proceedings, in which the Commission was actively participating as of June 30, 1942, involved 137 corporations (114 principal debtor corporations and 23 subsidiary debtors). These debtors had aggregate stated assets of approximately $1,753,306,000, and aggregate listed liabilities of approximately $1,116,670,000. With respect to the 34 new cases in which the Commission participated during the year, its notice of appearance was filed at the request of the judge in 12 proceedings, while in the remaining 22 the Commission entered its appearance upon the approval by the judge of the Commission's motion to participate. Of the 34 proceedings, 31 were instituted under Chapter X, and 3 under Section 778. The debtors involved in these 34 proceedings had aggregate stated assets and aggregate indebtedness of approximately gregate $128,389,000 and $92,423,000, respectively. 27 The Commission As A Party To Proceedings There have been no significant changes in the past fiscal year in the policies or practices of the Commission in performing its functions under Chapter X, which have been described in previous annual reports. However, four years of experience by the Commission, the federal courts and the reorganization bar with the operation of Chapter X have reduced the amount of time required to be spent on purely procedural questions, and have permitted greater concentration of the Commission's energies upon substantive matters. There now exists a substantial number of precedents on nearly all important procedural and interpretive questions. Plans Of Reorganization Under Chapter X The Commission's most important function under Chapter X is to aid the courts in effecting consummation of a fair and feasible plan of reorganization. After four years of experience there has been some change in the nature of the problems with which the Commission has to deal. With respect to the fairness of plans, certain basic legal principles urged by the Commission throughout its activities under Chapter X are now firmly established as a result of the Supreme Court decisions in the Los Angeles Lumber 3/ and Consolidated Rock Products 4/ cases. The problem of fairness has become to a considerable extent one of studying and analyzing the law and facts of particular cases. 1/ Appendix Table 33 contains a complete list of reorganization proceedings in which the Commission participated as a party during the year ended June 30, 1942. 2/ Under Section 265a of the Bankruptcy Act, as amended, the Commission receives copies of every petition for reorganization filed under Chapter I and copies of other specified documents filed in the proceedings. 3/ 308 U.S. 106. 4/ 312 U.S. 510. The important developments in the administration of Section 11 (b) (2) in the past fiscal year may be summarized as follows: (1) Under this provision the Commission instituted proceedings against the following companies: (2) Section 11 (b) (2) hearings were held with respect to the following holding company systems: 3615 3595 (3) Orders were entered by the Commission prescribing action which companies in some of the major holding-company systems must take to comply with the simplification requirements of Section 11 (b) (2), including those in the following cases: (4) A number of transactions proposed by registered holding companies or their subsidiaries pursuant to Section 11 (e) and other applicable sections, and tending to effectuate full or partial compliance with the requirements of Section 11 (b) (2), were approved by the Commission. The following companies were among those affected: Section 11 (e) provides a means whereby holding companies and their subsidiaries may file plans designed to bring about compliance with Section 11 (b). Twenty-nine such plans were filed during the fiscal year. Before a plan can be approved it must be found fair and equitable to persons affected thereby. An interesting example of the application of the Commission's powers under Section 11 (e) and Section lì (b) (2) respecting an operating company is the Jacksonville Gas Company case. Jacksonville Gas Company was on the verge of bankruptcy but was able to file a voluntary reorganization plan pursuant to Section 11 (e) of the Act. In the space of a very short period of time a complete reorganization was approved and was duly enforced at the company's request in the United States District Court in Florida. 3/ Section 11 (e) plan. For the Commission's opinion see Holding Company Act Release No. 3570. The important developments in the administration of Section 11 (b) (2) in the past fiscal year may be summarized as follows: (1) Under this provision the Commission instituted proceedings against the following companies: (2) Section 11 (b) (2) hearings were held with respect to the following holding company systems: 3615 3595 |