On March 30, 2022, continuing its rulemaking rampage, the SEC proposed new rules and amendments to “enhance” (the SEC’s current word of choice) disclosures relating to both IPOs of SPACs and business combinations between SPACs and operating companies – known as deSPAC transactions. The proposals would change the Securities Act treatment of business combinations involving a shell company; amend the financial statement requirements for transactions involving shell companies; provide guidance on the use of projections in SEC filings; and assist SPACs in assessing when they may be subject to the Investment Company Act of 1940.
Specifically, the proposals would:
- require additional disclosures regarding SPAC sponsors, conflicts of interest, and dilution, as well as additional disclosures on deSPAC transactions, including with respect to the fairness of the transactions to SPAC investors;
- treat the private company in a deSPAC transaction as a co-registrant when a SPAC files a registration statement on Form S-4 or F-4 covering the transaction, imposing the same degree of Securities Act liability on both the SPAC and the target company;
- require a re-determination of Smaller Reporting Company status within four days following the consummation of a deSPAC transaction;
- amend the definition of “blank check company” to make the liability safe harbor under the Private Securities Litigation Reform Act of 1995 for projections and other forward-looking statements unavailable in filings by SPACs and certain other blank check companies; and
- deem underwriters in the SPAC’s IPO to be underwriters with respect to the deSPAC transaction in some cases.
The proposals are subject to public comment for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.
Please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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