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Buffett’s Battle in Texas Hinges on Technicality

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July 17, 2017 by   Leave a Comment

Is it possible to own a company without controlling it, or even being “affiliated” with it?

That’s the fine point of corporate governance state officials and Warren Buffett’s Berkshire Hathaway Inc. are debating and weighing.

The issue stems from Berkshire Hathaway’s efforts to maneuver around a state law that has jeopardized the conglomerate’s ongoing operation of nearly three dozen Texas car dealerships because it also owns a company that manufactures recreational vehicles, Indiana-based Forest River Inc.

State law prohibits a motor vehicle manufacturer from also owning dealerships, even if the vehicles aren’t of the same type.

However, the law defines a “manufacturer” as someone “affiliated with” a manufacturer or “controlled by” a manufacturer.

That has constituted enough potential wiggle room for Raymond Palacios Jr., board chairman of the Texas Department of Motor Vehicles, to request an opinion from Texas Attorney General Ken Paxton as to whether it’s possible for a company that wholly owns a motor vehicle manufacturer — in this case, Berkshire Hathaway’s ownership of Forest River — to “cease to be ‘affiliated with’ the motor vehicle manufacturer by relinquishing control of the manufacturer while maintaining ownership of it.”

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