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Broadcast Station Update: Biennial Ownership
Report Deadline – December 1
Affected States:
- Radio: Alabama, Connecticut, Georgia, Massachusetts,
Maine, New Hampshire, Vermont, and Rhode Island
- TV: Colorado, Minnesota, Montana, North Dakota,
and South Dakota
Published
by DWT's
Broadcast Group
[November 2007]
By December 1, 2007, radio stations in Alabama,
Connecticut, Georgia, Massachusetts, Maine, New Hampshire, Vermont,
and Rhode Island, and television stations in Colorado, Minnesota,
Montana, North Dakota, and South Dakota must prepare and file
an FCC Form 323 Biennial Ownership Report with the Federal Communications
Commission (FCC). Similarly, noncommercial stations in these
states must file a Biennial Ownership Report on FCC Form 323-E.
Ownership Reports are to be filed every other year, reporting
on changes in the licensee’s ownership and updating the
information requested by the form. Ownership information must
be provided for all attributable owners of the licensee (see
below). Other changes to be noted in the report would include
changes in broadcast interests of the licensee, and changes
in the list of documents that need to be filed with the Commission
pursuant to Section 73.3613 of the rules. Those documents are
described in Attachment
A hereto, but principally deal with agreements that could
affect future ownership, or ones that in some way restrict the
operations of the licensee. Examples of such agreements include
Options, Rights of First Refusals, Stock Pledge Agreements,
Security Agreements that place significant restrictions on the
operations of the licensee, and programming agreements such
as Time Brokerage Agreements or Television Network Affiliation
Agreements.
Note that stations that are co-owned with stations in other
states can elect a unified Ownership Report filing date, as
long as the licensee has at least one station in a state with
that reporting date. In that case, the licensee will file its
report on every other anniversary of the renewal filing of the
stations in the state it elects. If the licensee of a station
in one of the states listed above has made the election to file
a consolidated report for all of its stations, and notified
the Commission of that election, there is no additional obligation
to file an Ownership Report on December 1.
Attributable interests
While a full discussion of who has an attributable interest
in a licensee would take many pages, there are some generalities
that can be summarized here. In a corporate licensee, officers,
directors, and shareholders with a 5 percent or greater interest
in the voting stock of a company are deemed to have an attributable
interest. In general and limited partners, all general partners
have attributable interests. In addition, in limited partnerships,
any limited partner who is not insulated from control, both
by the written terms of the limited partnership agreement and
in day-to-day practice, has an attributable interest. To be
exempt from attribution, the written terms of the limited partnership
agreement must contain “magic language” restricting
the activities of the limited partner in a number of areas.
Attachment
B to this memo contains the magic language required for
insulating a limited partner. The remainder of the partnership
agreement must not contradict this restrictive language.
With respect to a limited liability company, managers of the
company are attributable, as are all members unless they are
insulated in the same manner as limited partners, as described
above. In order for the interests of members to be nonattributable,
the LLC agreement would need to contain the same “magic
language” as a limited partnership agreement, and the
members would have to act in accordance with those restrictions
to preserve their insulation.
In noncommercial entities, the attributable owners are those
who make decisions for the entity. In most non-profit corporations,
that would be the company’s officers and directors. For
other non-profit entities such as a college or other institution,
it would normally be the governing board.
An Ownership Report is not required for individuals or LPTV
stations
Under the FCC’s Rules, if you hold a station’s
license as an individual, or as a general partnership made up
entirely of natural persons ( i.e. individuals as opposed to
corporations or other business entities), then you are not required
to file a biennial Ownership Report. The reason for this is
that if there are any changes in the ownership of a licensee
owned by an individual or general partnership, prior FCC permission
is required. For instance, if an individual adds a second owner,
he has created a partnership, requiring approval on an FCC Form
314 (or possibly a Form 316 if the new owner has less than a
50 percent voting interest). Similarly, the FCC takes the common
law view that change of partners in a general partnership creates
a new partnership, thus requiring prior FCC approval.
Because the FCC has traditionally collected less ownership
information from licensees of low power television stations
and Class A television stations, those licensees are not required
to file ownership reports.
Basic questions when preparing the Biennial
Ownership Report
In the event your station’s information may have changed
since the last time you prepared and filed a biennial Ownership
Report, you should review it carefully and make any necessary
changes. In particular, you should consider the following basic
information as you review the report. While the FCC should be
notified when some of this information changes even apart from
the ownership filing deadline, the preparation of the biennial
report gives the licensee a good opportunity to review the continuing
accuracy of all this information.
- Is the licensee’s contact information still accurate?
If the address of the licensee has changed, that should be
reported on FCC Form 5072 when the change occurs. Waiting
to report that change until the Ownership Report could mean
that important communications from the FCC may be missed.
- Are the call signs and communities of license listed on
the form still accurate? Make sure that the actual community
of license for each station is reported on the Form, not the
market the station may serve.
- Have any of the officers, directors, or other parties directing
the management of the licensee changed since the last report?
- Have the voting and equity percentages listed for the shareholders,
partners, or members changed since the last report?
- Have any of the names or addresses of the principals changed
since the last report?
- Has the station entered into any agreements that need to
be filed at the Commission pursuant to Section 73.3613 (see
Attachment
A)? If so, do the changes need to be listed on the report
and filed with the FCC?
Reports for companies with attributable
owners who are not individuals
If the licensee company has attributable owners who are not
individuals, then ownership reports for each of those companies
also need to be filed. Ownership Reports need to be filed for
each company that has an attributable interest in the licensee.
Ownership reporting is cut off only when an owner “up
the chain” is insulated from control ( e.g. using the
“magic language” for an LLC or limited partnership)
or if their interest is less than 5 percent in a corporate licensee
(the Form 323 sets out a “multiplier” formula to
be used for companies to compute whether their holdings in other
companies exceed the 5 percent benchmark).
Additional considerations for public
companies
At the time of the filing of the Ownership Report, public companies
and other companies with widely dispersed ownership need to
assure that they are in compliance with the FCC’s restrictions
on alien ownership. If the company cannot, simply by reviewing
the rolls of its shareholders, determine that 80 percent of
the corporate licensee’s stock (or 75 percent of a parent
company) is owned by U.S. citizens, the Company must take other
steps to make sure that the company is in compliance. A random
survey of shareholders has been suggested by the FCC as one
means for a licensee to make such a determination. Alien ownership
considerations for non-corporate entities are complex. Counsel
should be consulted with any questions.
Character qualifications
While not actually filed with the Ownership Report, Section
1.65 of the Commission’s rules requires that each licensee
report to the Commission any adverse legal findings that could
affect the character qualifications of a licensee. If there
has been an adverse finding of a felony, any antitrust or unfair
competition issue relating to media matters, any fraudulent
statement to another government agency, or any discrimination
matter, then the licensee must file a report with the Commission.
A report must also be filed if any business owned or controlled
by an attributable owner is involved in such conduct, or if
an attributable owner is directly involved in such conduct at
another business. That report is to be filed on the anniversary
date of the filing of the license renewal, so a report would
be due at the same time as your ownership report. If such conduct
occurs in the year that a Biennial Ownership Report is not due,
then a report would still need to be filed on the anniversary
date of the filing of the renewal. For companies with widely
disbursed ownership, the licensee should survey its attributable
owners to make sure that they have not been involved in such
conduct.
Preparing and filing the Biennial Ownership
Report
The FCC Form 323 Ownership Report, and the Form 323-E, must
be filed with the FCC electronically. Accordingly, the report
must be prepared and submitted through the FCC’s CDBS
filing system, which can be accessed at the following web site:
www.fcc.gov/mb/cdbs.html.
If there have been no changes in the station’s ownership
since the last biennial Ownership Report, the station must still
prepare and file a new report; however, the CDBS filing system
allows you to utilize information from a prior electronic ownership
report, which should simplify the completion of the new form.
If you do not already have a CDBS filing account, you can create
one by following the directions at the FCC’s website.
In addition to the CDBS account number and password, you will
also need the licensee’s FCC Registration Number (FRN)
and password when you are ready to submit the Form.
Once the report has been submitted electronically, commercial
stations must then submit the necessary FCC filing fee, which
is $60.00 per call sign. The fee can either be paid electronically
via credit card, or in paper with a check payable to the FCC.
For more information about the FCC’s ownership rules,
or for assistance in preparing and filing your Form 323 Ownership
Report, please contact any of the lawyers in the Davis Wright
Tremaine LLP Broadcast Practice Area.
For more information, please contact:
This advisory is
a publication of the Broadcast Group of Davis Wright Tremaine
LLP. Our purpose in publishing this advisory is to inform our
clients and friends of recent developments in the broadcasting
industry. It is not intended, nor should it be used, as a substitute
for specific legal advice as legal counsel may only be given
in response to inquiries regarding particular situations.
Copyright © 2007, Davis Wright
Tremaine LLP.
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