Lawyers & Professionals

Firm Overview

Instead of trying to be everything to everybody, we’ve made a name for ourselves by delivering what our clients need most: in-depth, hands-on legal counsel throughout the financial services sector — and beyond.

Get to know us

Firm News

There’s a lot going on at Schulte — we’re wrapping up high-profile matters, welcoming talented new lawyers, speaking on issues that affect our clients, and more.

Read all about it

Pro Bono

Throughout our history, Schulte has provided comprehensive pro bono services to local and national nonprofit organizations. Today, we serve more than 50 nonprofits and work to advance a variety of social justice causes.

Learn more

Diversity and Inclusion

Inside the firm, we work hard to attract diverse, talented lawyers and encourage their career growth and advancement. And outside the office, we’re active in volunteer drives and local initiatives that support women and minorities’ professional success.

See what we’re up to


If you’re a current or former Schulte lawyer, join our Alumni Network on LinkedIn to stay connected with old friends, make new contacts, and share your successes, ideas and insights.

Stay in touch

Social Responsibility

We take doing “good work” seriously — whether we’re talking about our high ethical standards or the way in which we foster a positive and inclusive culture for our personnel and support local communities.

See how we work


  • New York

    • 919 Third Avenue
    • New York, NY 10022
    • United States of America
      • +1 212.756.2000 Phone
      • +1 212.593.5955 Fax
  • Washington, DC

    • 901 Fifteenth Street, NW, Suite 800
    • Washington, DC 20005
    • United States of America
      • +1 202.729.7470 Phone
      • +1 202.730.4520 Fax
  • London

    • One Eagle Place
    • London SW1Y 6AF
    • United Kingdom
      • +44 (0) 20 7081 8000 Phone
      • +44 (0) 20 7081 8010 Fax

This week, the Federal Reserve Board (“Board”) announced proposed rulemaking (to be published in 12 C.F.R. Parts 225 and 238) (“Proposed Rule”)[1] that would revise the Board’s regulations governing determinations of whether a company “controls” another company for purposes of the Bank Holding Company Act (“BHCA”)[2] or the Home Owners’ Loan Act (“HOLA”).[3]

We expect these changes will make investments in Banking Organizations more attractive to investors (including private equity funds, hedge funds and activist investors) and better facilitate joint ventures and minority investments by Banking Organizations.

In part, the Proposed Rule would codify much of the Board’s historical practice regarding control determinations, which currently does not appear in the Board’s regulations and, therefore, is primarily known only by experienced practitioners. As indicated by the Board:

The proposed revisions are intended to provide bank holding companies, savings and loan holding companies, depository institutions, [referred to herein, collectively, as “Banking Organizations”] investors and the public with a better understanding of the facts and circumstances the Board generally considers most relevant when assessing controlling influence. The increase in transparency due to the proposed rule should provide greater clarity and ensure consistency of decision-making, thereby reducing regulatory burden for banking organizations and investors.

However, under certain circumstances, the Proposed Rule would also significantly expand the relationships and rights an investor could have while still being deemed noncontrolling.

Why Is Being Deemed Noncontrolling Important?

Under U.S. banking law, an entity that is deemed to control a Banking Organization must register as a holding company with the Board. Becoming a holding company subjects the entity to regulatory supervision, capital requirements, “source of strength” obligations, and potentially significant activity and investment restrictions. Similarly, if a Banking Organization is deemed to control another entity, that entity will generally become subject to the laws applicable to the Banking Organization.

How Would the Proposed Rule Change the Level of Investment and/or Involvement Permissible for a Noncontrolling Investor?

Under the BHCA, a company has control over another company if the first company (i) directly or indirectly, or acting through one or more other persons owns, controls, or has power to vote 25 percent or more of any class of voting securities of the other company; (ii) controls in any manner the election of a majority of the directors of the other company; or (iii) directly or indirectly exercises a controlling influence over the management or policies of the other company.[4] HOLA contains a substantially similar test for control.[5]

However, under the Board’s recent historical practice applying the third prong, an entity possessing as little as 5 percent of any class of a second entity’s voting stock or 25 percent of its total equity (even if it does not hold any voting rights) could also be deemed a controlling shareholder, depending on its overall relationship with the second entity. The Proposed Rule would provide increased flexibility in several areas that would allow noncontrolling investors to maintain increased total equity stakes and greater relationships without being deemed to be in control of an entity. The chart below provides a brief summary of the Board’s historical practice with regard to the major potential indicia of control and, where applicable, the potential changes contained in the Proposed Rule. It is important to note, however, that most of the lines drawn by the Proposed Rule are merely presumptions. Thus, the Board would retain the discretion to find (after notice and opportunity for hearing) that a particular situation amounts to control based on the totality of the circumstances, despite the applicability of one or more presumptions of noncontrol.

Click here to read this Alert.

Authored by Joseph P. Vitale.

[1] The Proposed Rule is available here.

[2] 12 U.S.C. § 1841 et seq.

[3] 12 U.S.C. § 1461 et seq.

[4] See 12 U.S.C. § 1841(a)(2); 12 CFR 225.2(e).

[5] See 12 U.S.C. § 1467a(a)(2); 12 CFR 238.2(e).

This communication is issued by Schulte Roth & Zabel LLP for informational purposes only and does not constitute legal advice or establish an attorney-client relationship. In some jurisdictions, this publication may be considered attorney advertising. ©2019 Schulte Roth & Zabel LLP.

All rights reserved. SCHULTE ROTH & ZABEL is the registered trademark of Schulte Roth & Zabel LLP.