Cleaning Up Public Shells

Publicly traded companies become public shells when they experience a financial setback, abandon plans for a public capital raise, run out of money or just cease operations. After going public, certain public companies may also find it impossible to stay current in their SEC reporting requirements.

When a public company becomes a public shell, the shareholder base is left behind. If a merger partner is not readily available for a reverse merger into the public shell, certain structural deficiencies may develop that must be rectified before a merger candidate can be introduced.

The public shell Company’s 15c211 may lapse as market makers stop quoting the company’s stock price. The Company may fail to have board or shareholder meetings, to maintain minutes or may find itself without any board members.

Cleaning Up Public Shell Companies
Before a private company can go public via reverse merger with the public shell the following points must be addressed;

• All delinquent SEC filings (8K’s, 10Q’s, 10K’s, etc.) must be brought current.
  
• Should any outstanding SEC comments exist these must be answered.
  
• PCAOB audits must be completed and brought current.
  
• Overdue franchise taxes must be paid to the public shell company’ state of domicile in order to reinstate the corporation.
  
• The public shell’s bylaws and articles of incorporation must be located and updated.
  
• The public shell’s shareholder records must be retrieved from the transfer agent and reviewed for deficiencies or inaccuracies.
  
• All shareholders should be noticed and a shareholder meeting should be held so that they may be updated as to the condition of the public shell.
• A temporary management team may be installed to oversee the reorganization of the public shell and to assist with any applicable expenses.

The process is known as cleaning up public shells and it is most advisable to have an experienced securities attorney conduct, or at least oversee, the process. Without a clean public shell a successful reverse merger is not possible.