Do You Have To Register Shares Of A Company If It Is Merged

Going Public: Self-Registration as An Alternative to the Opposite Merger

A contrary merger is a common method by which private companies go public.
Companies capeesh this method because information technology is generally quick, though the procedure is comparatively expensive to other ways of going public. In a reverse merger scenario, a privately-held visitor acquires a majority of the shares of a public shell company whose shares are traded on a Usa-based exchange, and the shell visitor is then merged with the individual visitor. Simultaneous with this process, the company completes a private placement financing transaction. After the opposite-merger, the visitor may either file a registration statement for the purpose of registering the securities sold in the financing transaction, or allow re-sales of the securities subject field to Rule 144.

Self-registration is an alternative scenario, which saves a private visitor the estimated $350,000 cost of purchasing a public shell company. A private company accomplishes self-registration when information technology (i) completes a private placement financing transaction; (two) undertakes to become a publicly-held company by means of filing a registration statement covering shares to be sold past certain selling shareholders of the visitor, which will brand it a publicly reporting visitor under the Securities Exchange Act of 1934; and (iii) applies for listing on a U.s.-based substitution. The procedure can exist lengthy, but it is equally effective a reverse-merger in the long-run and more than price-effective in the brusk run.

Contrary Merger

In the reverse merger scenario, a privately-held company proposes a transaction whereby the shareholders of the private receive shares of a publicly-held crush company. The result is that the shareholders of the individual visitor become the bulk and controlling shareholders of the public company. Some or all the shareholders may get directors of the public company. The controlling shareholders consummate a opposite-merger by causing the public company to merge into the private visitor, with the public company remaining as the surviving company.

The first footstep in this process involves locating a public crush company with whom to complete a reverse merger transaction. In one case that is done, the parties involved negotiate the terms of the transaction, complete a due diligence review of the public company and finally complete the reverse merger transaction where the public company is the surviving entity. The cost of purchasing the public crush company typically comes out to around $350,000, which cost can be offset by the benefit of a relatively quick transaction. The fourth dimension frame for a opposite merger tin can vary widely depending upon the parties and the companies involved, merely tin can be completed in equally little equally xxx-60 days if everything is in guild and all parties are working together to complete the transaction in an expedited manner. It should be noted, however, that the completion of the transaction volition require the delivery of audited and unaudited fiscal statements for the post-merger visitor.

Simultaneous with the reverse merger, the companies complete a private placement offering in which securities of the post-merger company are sold to accredited investors. The timing of this volition depend upon the placement amanuensis and the investors but volition ultimately coincide with the completion of the reverse merger.

Finally, following the completion of the reverse merger and the private placement offering, the company will gear up and file a Course 8-Grand containing all material disclosure virtually the companies and the merger, including audited and unaudited historical financial statements, and a Schedule 14F containing all required disclosure relating to the change of the Board of Directors and the incoming/new directors to exist appointed. Shortly thereafter, the now-public visitor would typically file a registration statement which includes the shares sold in the individual placement, or else it may leave the re-sale of such shares subject to Rule 144.

Self-Registration

In a self-registration scenario, the registration statement is the musical instrument by which the company goes public. As with a reverse-merger, the individual visitor proposes a individual placement financing transaction, just information technology then prepares a registration argument with a re-sale prospectus, which registration statement contains all disclosures necessary for the SEC to make a determination every bit to the company'southward eligibility to go public. Once the registration argument is effective, FINRA must determine, upon review of a Form 15(c)211 whether the company qualifies to have its securities traded on a national substitution, such as the OTCQB. The registration statement will have created a public market for the trading of the company'southward securities, which is one FINRA requirement.

The lengthy part of self-registration consists in the preparation and review of the registration statement on Grade Due south-1. Form S-i is a form for registration of securities that is filed with the SEC for the purpose of registering the sale (and/or resale) of securities of a company pursuant to the Securities Act of 1933. The information required by Course Due south-one is similar in scope to that of a Form 10-K annual report filed past a public company. In accordance with SEC Rules and regulations, Class S-1 contains certain disclosure about the business of the company, its management and shareholders, every bit well as audited and unaudited financial information about the company.

The training and filing the Grade S-1 with SEC takes approximately four weeks, assuming that the company has audited financial statements that can readily be presented for inclusion in the filing. Once filed, the Form South-one will be subject to review and comment by the SEC. This process involves receiving and responding to written comment letters from the SEC regarding sure disclosure and financial matters. This review process is known to be lengthy. The number and complexity of the comments received, and the time information technology takes for the company to prepare an amended filing and refile with the SEC, determines how chop-chop the residue of the review process volition have. It typically takes most 120 days from start to terminate.

In whatsoever example, the cocky-registered or opposite-merged Company will not be eligible to have its securities traded on the OTCQB until all of the comments are cleared past the SEC, and the SEC has communicated its clearance to the FINRA examiner that is reviewing the Grade fifteen(c)211 awarding for trading of the company's securities on the OTCQB. The FINRA review will largely be due diligence and volition rely on the SEC review and approval for information technology to become comfortable with the company. The other primal event that they will wait at is the ownership of the Visitor and will generally require the Company to have at least 35 shareholders owning at least 1,000 shares of the Company's mutual stock. There are a few other issues in the process that are worth looking at.

Determination

As compared to the contrary-merger, the self-registration process tin can take longer and information technology can exist riskier given that there is no guarantee the registration statement volition be declared effective. Yet, cocky-registration can be cost-effective in the short run and accept the same cease result every bit a reverse-merger—it will have a private visitor public. The decision as to which avenue is best for a given company depends on its priorities and circumstances, merely the availability of more than 1 method of going public opens the way for companies to exercise what is most appropriate given their priorities and limitations.

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Gregory Sichenzia, a founding member, counsels public and private companies in all securities laws matters, from complex financing transactions and listings on diverse stock exchanges through everyday regulatory requirements. He has as well been responsible for structuring innovative merger and conquering transactions. Throughout his career he has represented many companies and investment banks in initial public offerings of securities, and has represented numerous public companies in private equity financing transactions ("PIPEs") and the resulting resale regist

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firm that is headquartered in New York and offers a total range of financial and business legal services. Mr. Friedman is principally engaged in the practise of Corporate and Securities Law, with a concentration on public offerings and private placements. His extensive feel includes reverse mergers (both domestic and foreign companies), secured and unsecured private equity financing transactions (PIPEs), besides as initial public offerings (IPOs), registered direct offerings (RDs) and shelf offerings.

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Mr. Marcus was the Chairman of the Securities Law Exercise at Gersten Cruel LLP where he spent 22 years. Prior to joining Gersten Brutal, Mr. Marcus was an associate at Kramer, Levin, Nessen, Kamin & Frankel LLP. Mr. Marcus specializes in advising pocket-sized and medium sized companies on corporate finance, SEC disclosure matters, corporate governance, and private and public offerings, including equity offerings, high-yield, and convertible offerings.

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