An Overview of The Up-C Structure in Energy Deals


The UP-C structure — which offers tax benefits to pre-IPO investors and sponsors — likely will expand among energy companies.

In 2013, several energy companies went public using a so-called UP-C structure. In using this structure, the public company (IPOCo) typically owns a substantial equity interest in a subsidiary holding company (Holdings), which owns the operating assets and is a tax passthrough entity (e.g., a limited partnership or limited liability company). The equity interests in Holdings not held by IPOCo are typically owned by the pre-IPO owners, which may consist of individual investors, private equity funds or others. The pre-IPO owners in Holdings have the right to exchange their Holdings equity interests for shares in IPOCo, at which point IPOCo gets a stepped-up tax basis in the Holdings equity interests (which results in tax savings to IPOCo through additional depreciation and amortization). The pre-IPO owners are taxed on any gain recognized as a result of the exchange. The pre-IPO owners and IPOCo may enter into a tax receivable agreement pursuant to which IPOCo would pay the pre-IPO owners a portion (typically 75 to 85 percent) of the tax benefits realized from the basis step-up resulting from the exchanges.

Please see full Alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Latham & Watkins LLP | Attorney Advertising

Written by:


Latham & Watkins LLP on:

Popular Topics
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.