Free Initial Consultation
Laura Anthony, Founding Partner
Toll Free: 800-341-2684
Phone: 561-514-0936
Fax: 561-514-0832
LauraAnthonyPA@aol.com |
West Palm Beach
Legal & Compliance, LLC
330 Clematis Street, Ste. 217
West Palm Beach, FL 33401 |
Miami Beach
Legal & Compliance, LLC
940 Lincoln Road, Ste. 319
Miami Beach, FL 33139 |
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Public
Shells
When publicly traded companies run out of money, undergo significant
changes in management, experience internal conflicts or a variety
of other unforeseen circumstances, they may fail to continue
to satisfy the reporting requirements of their shell. Some shell
companies fall behind in their reports or stop reporting entirely.
Companies that never reported may allow their 15c2-11 to lapse
or stop holding regular board and shareholder meetings; stop
maintaining minutes and otherwise have allowed their corporate
records to become delinquent.
The term "cleaning up" a public shell is frequently
used throughout the industry and can involve various legal issues
including:
- Reinstating a corporate charter and paying back franchise
taxes
- Updating articles of incorporation and bylaws to make
them current and fit the needs of the current company.
- Conducting reverse splits to lower the float and increase
the stock price.
- Updating SEC reportings or initiating reporting for the
first time.
- Answering outstanding SEC comments on prior reports that
were never addressed.
- Putting a qualified board and/or management into place.
- Updating the minute books.
- Holding a shareholders' meeting and updating reports to
shareholders.
- Updating compliance per SOX by adopting corporate compliance
standards and a code of ethics.
- Educating the new or current board regarding their duties
as a board of a public company, including the duty of loyalty,
duties regarding conflict of interest and self dealing,
duties against short swing profits and reporting requirements
under sections 13 and 16 of the Securities Exchange Act.
- Putting a competent management team in place and enhancing
corporate structure.
- Updating or creating a business plan.
- Updating audits.
Pink Sheet Shell Companies
Pink Sheet Shell Companies or "Pinks" are companies
that are listed by the National Quotation Bureau (NQB). The
NASD and the SEC do not require Pink Sheet companies to maintain
current reporting status or undertake expensive annual audits
although audits are recommended. Also, there are no listing
requirements for the Pink Sheets such as amount of capital;
number of shareholders; market cap; share price; or amount of
assets.
A Pink Sheet Company is regulated by state and federal securities
laws, but is not subject to separate exchange regulations. Requirements
regarding number of board members, whether such board members
are independent, annual shareholder meetings, proxy notices
etc. originate from state law and are not imposed by the National
Quotation Bureau or the Securities Exchange Commission (SEC).
For example, the American Stock Exchange (AMEX) and the New
York Stock Exchange (NYSE) in and of themselves are Self Regulatory
Organizations (SRO's) whereas the National Quotation Bureau
is not. In summary, Pink Sheets are subject to fewer regulations
and are governed by fewer regulatory bodies than NASDAQ Small
Cap, NYSE and AMEX issues.
Pink Sheet Shell Companies exist in various forms; including
reporting and non-reporting as well as trading and non-trading.
Pink Sheet Companies are generally priced lower than Bulletin
Board Companies and are usually subject to the limitations of
the Penny Stock Rules promulgated under the Securities Exchange
Act of 1934 including:
- Broker-dealers who recommend these stocks must establish
a special written suitability determination for the purchaser.
- The purchaser's written agreement to the transaction must
be received prior to the sale.
- The purchaser must be provided with risk disclosure documents
that identify certain risks associated with investing in
penny stocks and describe the market for penny stocks as
well as a purchaser's legal remedies.
- Broker-dealers who recommend these stocks must obtain
a signed and dated acknowledgment from the purchaser demonstrating
that the purchaser has actually received the required risk
disclosure document before a transaction can be completed.
The term "Pink Sheets" also refers to a centralized
quotation service that collects and publishes market maker quotes
for OTC securities in real time. Their web site PinkSheets.com
provides price quotes, financial news and information about
OTC companies to investors. Quotes are provided with a fifteen-minute
delay.
The Pink Sheets is not a stock exchange or a regulated entity.
Price quotations are provided by OTC market makers and company
information is provided by the OTC companies.
Bulletin Board Shell Companies
The highest priced public shells that trade on the Over the
Counter (OTC) market for reverse mergers are OTC Bulletin Board
Shells or OTCBB's.
The OTC Bulletin Board is also a centralized quotation system
and is operated by the National Association of Securities Dealers
(NASD) and requires that all companies whose stock is traded
on the OTC Bulletin Board (or NASDAQ or AMEX) maintain their
current reporting status with the Securities and Exchange Commission
(SEC), including current audited financial statements. OTC Bulletin
Board Shells, like Pinks, exist in trading and non-trading varieties.
Bulletin Board Companies are reporting entities and subject
to all the reporting requirements of the SEC. They are required
to be "transparent" in their operations so that investors
can make an informed decision before investing. In addition,
merger candidates can assess the value of the stock being used
to acquire them.
Also like Pinks, OTC BB Shells are part of the National Quotation
Bureau and not a Self Regulatory Organization (SRO). Accordingly,
they are not bound by the additional rules and regulations of
exchange SRO's (such as the NASD) regarding operations and dependence
of directors; the requirement to maintain a separate audit committee;
and the requirements to hold annual meetings while satisfying
proxy requirements, all of which requirements are governed by
state law.
There are no actual listing requirements associated with Bulletin
Board Shells; for example the Bulletin Board does not set thresholds
regarding number of shareholders; assets; market capitalization
and share price. The fundamental difference between a Bulletin
Board and a Pink Sheet or Grey Sheet is the reporting requirements.
While some Pinks are non-reporting entities, a Bulletin Board
is subject to the reporting requirements of the Securities Exchange
Act of 1934 including but not limited to annual reports on Form
10K, quarterly reports on Form 10Q and current reports on Form
8K. |
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Reverse Mergers
Contracts 
