Reston, VA asked in Tax Law and Mergers & Acquisitions for Virginia

Q: What constitutes voting shares in the eyes of the IRS?

In matters pertaining to 26 U.S. Code § 368 - Definitions relating to corporate reorganizations, I am looking for a clear definition of what constitutes "Voting Shares" when contemplating a Reverse Triangular Merger (RTM) as a means of acquiring a business.


I own a small private equity fund in which we acquire small and medium size private businesses. In order to increase the speed at which we acquire a business, decrease the amount of risk through lowering the cash outlay and providing the business seller with the tax benefits of a tax-free/tax deferred reorganization we have opted to do RTM's as a means of accomplishing this. Our final hurdle in the structure is ensuring that the merger consideration (Limited Partner Units) counts as voting shares and that we would be in compliance with 26 U.S. Code § 368 (a)(1)(c)

Answer Followup: More specifically, I am looking to find any required minimum voting right pertaining to the law and if traditional LP Units meet them.

1 Lawyer Answer
Sean R Hanover
Sean R Hanover
  • Fairfax, VA
  • Licensed in Virginia

A: Great question! In answer, a "voting share" refers to a class of shares, the possession of which entitled the bearer to vote on matters related to the corporation or organization. As such, you need to look at the corporate charter, or depending on the structure of an LLC, the operating agreement, to determine what class of shares (or units) have the right to vote.

Need help reviewing a charter to determine which class of shares can vote? Feel free to reach out to me directly at 703-402-2723 or

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