SEC Officials Issue Statement on SPACs.
2024-09-27 01:10:46
As the frenzy surrounding Special Purpose Acquisition Companies (SPACs) continues to surge, the Division of Corporation Finance at the U.S. Securities and Exchange Commission recently issued a statement elucidating several noteworthy considerations regarding the merger transactions between non-listed companies and SPACs. The statement underscores that SPACs, as shell companies, are subject to the following regulations:
The merged company must submit financial statements within four business days following the completion of the merger transaction, as required by Item 9.01(c) of Form 8-K. The 71-day extension under Item 9.01(c) does not apply to SPACs.
The S-8 form cannot be used to register the issuance of compensation securities within 60 days after the information on Form 10 is filed.
For three years post-transaction, the merged company is prohibited from engaging in activities including:
Incorporating reports, shareholder proxy statements, or information statements required to be filed under the Securities Exchange Act of 1934 (the "Exchange Act") into the registration statement on Form S-1;
Qualifying as a well-known seasoned issuer;
Utilizing free writing prospectuses;
Conducting roadshows (including virtual roadshows) that constitute free writing prospectuses;
Relying on the safe harbor provisions of Section 5(c) and 163A of the Exchange Act for pre-filing communications.
The statement emphasizes that merged companies subject to the reporting obligations under the Exchange Act must (1) maintain the issuer's books, records, and accounts in accordance with the Exchange Act's requirements, accurately reflecting the issuer's transaction details and asset dispositions, and (2) comply with the "internal control" provisions, including establishing and maintaining an internal accounting system that "adequately and reasonably demonstrates management's control, authority, and responsibility over the issuer's assets."
If the SPAC was listed on a national exchange such as the New York Stock Exchange or NASDAQ prior to the transaction, the merged company must meet certain quantitative and qualitative requirements for initial listing post-transaction, including maintaining a majority of independent directors, an independent audit committee composed of directors and officers with relevant skills, independent directors overseeing executive compensation and director appointments, and establishing a code of conduct applicable to all directors, officers, and employees.