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Articles of Incorporation

Going Public Without An IPO

On April 3, 2018, Spotify made a big board splash by debuting on the NYSE without an IPO. Instead, Spotify filed a resale registration statement registering the securities already held by its existing shareholders. The process is referred to as a direct listing. As most of those shareholders had invested in Spotify in private offerings, they were rewarded with a true exit strategy and liquidity by becoming the company’s initial public float.

In order to complete the direct listing process, NYSE had to implement a rule change. NASDAQ already allows for direct listings, although it has historically been rarely used. To the contrary, a direct listing has often been used as a going public method on the OTC Markets and in the wake of Spotify, may gain in popularity on national exchanges as well.

As I will discuss below, there are some fundamental differences between the process for OTC Markets and for an exchange. In particular, when completing a direct

Completing A Name Change Without Shareholder Approval

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Generally a name change is completed through an amendment to a company’s articles of incorporation.  Moreover, amendments to articles of incorporation generally require shareholder consent, which can be time-consuming and expensive and become even more so if the company is subject to the reporting requirements of the Securities Exchange Act of 1934.

All companies with securities registered under the Securities Exchange Act of 1934, as amended, (i.e., through the filing of a Form 10 or Form 8-A) are subject to the Exchange Act proxy requirements found in Section 14 and the rules promulgated thereunder.  The proxy rules govern the disclosure in materials used to solicit shareholders’ votes in annual or special meetings held for the approval of any corporate action requiring shareholder approval.  The information contained in proxy materials must be filed with the SEC in advance of any solicitation to ensure compliance with the disclosure

Reverse Mergers Hinge on Due Diligence and Cleaning Up Public Shells

When a publicly traded company “goes dark” and becomes delinquent in its filing requirements, it generally becomes a public shell and is no longer quoted on the Over the Counter Bulletin Board Exchange (OTCBB). However, with the assistance of an experienced securities attorney, the shell company can be restored so that a merger candidate can be introduced.

Some of the specific details that constitute the clean-up process include:

  • Reinstating the Company’s corporate charter and paying franchise taxes to the Company’s state of domicile, if necessary
  • Working with a PCOAB (Public Company Oversight Accounting Board) auditor to update all necessary financial statements and audits
  • Holding a shareholder meeting for purposes of electing directors and amending articles of incorporation and bylaws as necessary
  • Updating the Company’s articles of incorporation and bylaws to ensure they suit the needs of the successor Company
  • Conducting reverse splits of the Company’s outstanding shares of common stock in order to decrease the size of the outstanding common
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