Q. What is a shell company? A. A shell company
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Posted On: 01/21/2022 8:10:00 AM
Q. What is a shell company?
A. A shell company is an issuer with no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents or assets consisting of any amount of cash and cash equivalents and nominal other assets.
Q. If a non-reporting company was a shell company ten years ago, is it required to register a class of securities on Form 10 to cure its shell status before its shareholders can rely on Rule 144’s safe harbor?
A. Yes, if a non-reporting entity was a shell company at any time during any time its history, the company must register a class of securities on Form 10 pursuant to the Exchange Act or its stockholders cannot rely upon rule 144’s safe harbor.
Q. How does an issuer cure shell company status for purposes of Rule 144?
A. An issuer can cure shell company status by filing a Form 10 registration statement that is declared effective by the SEC and complying with certain additional requirements:
the company no longer be a shell company;
the company must be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
the company must have filed all reports and schedules required by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and
the company must have filed current “Form 10 information” reflecting that it is no longer a shell company.
Q. Which issuers can register securities on Form 10?
A. All issuers can register securities on Form 10.
Q. When are issuers required to file a registration statement on Form 10?
A. Issuers with over $10,000,000 in total assets and 750 or more record holders must file a registration statement on Form 10.
Q. Can an issuer voluntarily file a registration statement on Form 10?
A. Yes, an issuer can voluntarily file a Form 10.
Q. When will a Form 10 registration statement become effective?
A. Form 10 registration statements become effective automatically sixty days after the initial Form 10 filing date.
Q. What are the consequences if a Form 10 registration statement becomes effective?
A. The company becomes subject to the reporting requirements of the Exchange Act when the Form 10 becomes effective. This obligates the company to file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Additionally, the company becomes subject to the SEC’s proxy rules and the company’s management and shareholders become subject to the beneficial reporting requirements of Sections 13 and 16 of the Exchange Act.
Q. If a Form 10 registration statement becomes effective will it result in the assignment of a ticker symbol?
A. If a Form 10 is effective, it will not cause a company’s stock to be traded on an exchange or any quotation service such as the OTC Markets. Additionally, a Form 10 will not result in the assignment of a ticker symbol.
Q. How does a company obtain a ticker symbol after a Form 10 is effective?
A. After a Form 10 is effective, it must seek a ticker symbol through a market maker who submits an application to FINRA. Finra (not the SEC) has its own requirements for tickers symbol assignment.
Q. After a Form 10 is effective, will it satisfy the informational requirements of SEC Rule 15c-211?
A. If the Form 10 is effective and the information contained in the Form 10 is complete and current then the issuer has satisfied SEC Rule 15c-211.
A. A shell company is an issuer with no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents or assets consisting of any amount of cash and cash equivalents and nominal other assets.
Q. If a non-reporting company was a shell company ten years ago, is it required to register a class of securities on Form 10 to cure its shell status before its shareholders can rely on Rule 144’s safe harbor?
A. Yes, if a non-reporting entity was a shell company at any time during any time its history, the company must register a class of securities on Form 10 pursuant to the Exchange Act or its stockholders cannot rely upon rule 144’s safe harbor.
Q. How does an issuer cure shell company status for purposes of Rule 144?
A. An issuer can cure shell company status by filing a Form 10 registration statement that is declared effective by the SEC and complying with certain additional requirements:
the company no longer be a shell company;
the company must be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
the company must have filed all reports and schedules required by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and
the company must have filed current “Form 10 information” reflecting that it is no longer a shell company.
Q. Which issuers can register securities on Form 10?
A. All issuers can register securities on Form 10.
Q. When are issuers required to file a registration statement on Form 10?
A. Issuers with over $10,000,000 in total assets and 750 or more record holders must file a registration statement on Form 10.
Q. Can an issuer voluntarily file a registration statement on Form 10?
A. Yes, an issuer can voluntarily file a Form 10.
Q. When will a Form 10 registration statement become effective?
A. Form 10 registration statements become effective automatically sixty days after the initial Form 10 filing date.
Q. What are the consequences if a Form 10 registration statement becomes effective?
A. The company becomes subject to the reporting requirements of the Exchange Act when the Form 10 becomes effective. This obligates the company to file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Additionally, the company becomes subject to the SEC’s proxy rules and the company’s management and shareholders become subject to the beneficial reporting requirements of Sections 13 and 16 of the Exchange Act.
Q. If a Form 10 registration statement becomes effective will it result in the assignment of a ticker symbol?
A. If a Form 10 is effective, it will not cause a company’s stock to be traded on an exchange or any quotation service such as the OTC Markets. Additionally, a Form 10 will not result in the assignment of a ticker symbol.
Q. How does a company obtain a ticker symbol after a Form 10 is effective?
A. After a Form 10 is effective, it must seek a ticker symbol through a market maker who submits an application to FINRA. Finra (not the SEC) has its own requirements for tickers symbol assignment.
Q. After a Form 10 is effective, will it satisfy the informational requirements of SEC Rule 15c-211?
A. If the Form 10 is effective and the information contained in the Form 10 is complete and current then the issuer has satisfied SEC Rule 15c-211.
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