SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 8
On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions. The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs. The new rules spread beyond SPACs to shell companies and blank check companies in general. The compliance date for the new rules is July 1, 2025.
In the first blog in this series, I provided background on and a summary of the new rules – see HERE. The second blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE. The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE. Part 4 continued a
SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 7
On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions. The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs. The new rules spread beyond SPACs to shell companies and blank check companies in general. The compliance date for the new rules is July 1, 2025.
In the first blog in this series, I provided background on and a summary of the new rules – see HERE. The second blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE. The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE. Part 4 continued a review of
SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 6
On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions. The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs. The new rules spread beyond SPACs to shell companies and blank check companies in general. The compliance date for the new rules is July 1, 2025.
In the first blog in this series, I provided background on and a summary of the new rules – see HERE. The second blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE. The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE. Part 4 continued a review
SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 5
On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions. The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs. The new rules spread beyond SPACs to shell companies and blank check companies in general. The compliance date for the new rules is July 1, 2025.
In the first blog in this series, I provided background on and a summary of the new rules – see HERE. Last week’s blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE. The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE. Part 4 continued a
SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 4
On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions. The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs. The new rules spread beyond SPACs to shell companies and blank check companies in general. The compliance date for the new rules is July 1, 2025.
In the first blog in this series, I provided background on and a summary of the new rules – see HERE. Last week’s blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE. The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE. This week’s blog will
SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 1
On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions. The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs. The new rules spread beyond SPACs to shell companies and blank check companies in general.
The SEC is specifically requiring enhanced disclosures with respect to compensation paid to sponsors, conflicts of interest, dilution, and the determination, if any, of the board of directors (or similar governing body) of a SPAC regarding whether a de-SPAC transaction is advisable and in the best interests of the SPAC and its shareholders. The SEC has also adopted rules that deem any business combination transaction involving a reporting shell company, including a SPAC, to involve a sale of securities to the reporting shell company’s shareholders, and has amended several financial statement requirements applicable to transactions involving
SPAC Director And Sponsor Fiduciary Obligations
A year following the Delaware Chancery Court’s decision in Multiplan Corp. Stockholders Litigation (f/k/a Churchill Capital Corp III), the court again issued an opinion supporting a breach of fiduciary duty cause of action against SPAC directors and sponsors and confirming that a de-SPAC transaction should be reviewed using the “entire fairness” standard. In the January 2023 case of Delman v. Gigacquisitions3, LLC, et al. the Delaware Court denied a motion to dismiss by SPAC sponsors and directors, upholding their potential liability. Interestingly, the Delman motion was in front of the same vice-chancellor as was Multiplan. My blog on the Multiplan Corp. Stockholders Litigation (f/k/a Churchill Capital Corp III) case and its ramifications can be read HERE.
In addition to confirming the inherent conflict of interest of SPAC sponsors and directors, the cases will undoubtedly cause practitioners and market participants to implement new policies and procedures related to proxy statement disclosures, diligence, board discussions, financial valuations, capital raising
Class Voting in Delaware – The Saga Continues
Just a few weeks ago, I wrote about the Garfield v. Boxed, Inc. case in Delaware questioning whether Class A and Class B common stock in a SPAC structure were different series of a same class or different classes of stock requiring separate class voting in certain circumstances (see HERE). The Delaware Chancery court in Garfield v. Boxed, found that in that particular case, the Class A and Class B were separate classes requiring a separate class vote to increase the total outstanding common stock as required by the Delaware General Corporate Law (DGCL) Section 242(b)(2).
Following the Garfield decision, there has been a run on the Chancery Court by post-business-combination SPACs seeking to ratify shareholder approvals obtained during the de-SPAC process, in reliance on DGCL Section 205. Although the wording has varied, in essence each of the companies have asked the Chancery court to (i) validate and declare effective the company’s current certificate of incorporation
Class Voting In Delaware And The Impact On SPACs
In December 2022, the Delaware Chancery Court entered a ruling sending the SPAC world spiraling, for what seems like the 10th time in the last couple of years. As is always the case in a SPAC (or at least 99% of the time), common stock is broken into two series, Class A and Class B. The Class A common stock is issued to the public shareholders in the underwritten initial public offering and the Class B common stock is issued to the sponsor. Upon closing a business combination transaction, the sponsor Class B common stock automatically converts into Class A common stock, leaving one Class of common stock. Also, in the majority of SPAC transactions, the shareholder approval for the business combination transaction involves other changes to the charter documents for the SPAC, including a name change, and changes in authorized capital stock, etc. The term “charter” in this blog refers to the certificate of incorporation and any amendments
The SEC’S Spring 2022 Flex Regulatory Agenda
On June 22, 2022, the SEC published its semiannual regulatory agenda and plans for rulemaking. The Unified Agenda of Regulatory and Deregulatory Actions contains the Regulatory Plans of 28 federal agencies and 68 federal agency regulatory agendas. As expected, the Spring 2022 Agenda (“Agenda”) met with criticism from Commissioner Hester M. Peirce. Commissioner Peirce rips the newest Agenda as being disconnected with the SEC’s core mission and as being focused on special interest groups instead of a broad range of market participants. I’ll include her comments throughout this blog. The Agenda is published twice a year, and for several years I have blogged about each publication.
The Agenda is broken down by (i) “Pre-rule Stage”; (ii) Proposed Rule Stage; (iii) Final Rule Stage; and (iv) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a
