A shell company or shell corporation is a business entity with no tangible assets. There are pubic shell companies and also what is called a "shelf company". There is a big difference between the two. The public shell company, also called a public shell corporation, is a public company. The shelf company is just a private corporation that has been left to sit, since a company might want to acquire it later.
Public shell companies are businesses that already went through the Securities and Exchange Commission's (SEC) review process and received a stock symbol. A public shell company or public shell corporation can be 1 of 2 types of public companies:
(a) It can be a public shell company that was formerly a public company that was active and all the assets were removed; what's left is a public shell corporation.
(b) It can also be what is called a "blank check company," which is similar to a SPAC, a Special Purpose Acquisition Company.
We do not recommend that you go public with a shell company or a shell corporation, since shell companies typically have a history and other inherent problems.
It is best to do a Direct Public Offering (DPO) when going public. Reverse mergers with shell companies are to be avoided. It is best to do a self registration statement with the SEC (Securities and Exchange Commission) and do a self-underwriting or a DIY (do it yourself) initial public offering, also commonly known as an IPO (Initial Public Offering).
The benefits are that you go public and - with the help of a market maker and securities attorney - have your stock registered so you don't have Rule 144A stock and it becomes free trading. In addition to market makers to file a Rule 15c211, you will also need a transfer agent to help with DTC (Depository Trust Company) and also to get your stock and CUSIP number.
If you are interested in raising capital, you can use a corporate finance consultant that has good contacts within the venture capital community to assist you in capital sourcing. Other capital sources include private equity finance experts that specialize in private placements (PPM) and Regulation D, Rule 504 and Rule 506, that involve business financing for small business concerns. However, as can be seen from the above, once a company has undertaken the going public process successfully, it is so much easier for capital raising consultants to assist it in finding money for growth and expansion.
You want to insure you don't use a shell company or a shell corporation when going pubic; it is best to avoid a reverse merger with a public shell company as the vehicle for going public. A good road map for raising capital should start with a business plan that includes a direct registration as its first item. If you want to raise capital and become a public company it is imperative that you avail yourself of the services a capitalization consultant as, opposed to just finding a venture capital directory or other sources of capital and funding. Taking your company public and becoming a publicly business is not as difficult as you might imagine if you have IPO consultants that can advise you.
One of the drawbacks to going public is that you have to file a 10K annually and 10Q's quarterly with the Securities and Exchange Commission (the SEC). You are also subject to the reporting requirements of Sarbanes Oxley. You must have an audit done each year by a Certified Public Accountant firm that is a member must be a member of the PCAOB which is the Public Company Accounting Oversight Board.
Most companies find that the benefits that public companies receive far outweigh the costs of going public. Of course, providing you avoid reverse mergers with a public shell corporations.
--
Shaun Anthony is a public company capitalization consultant with many years experience in helping companies, such as a
shell company or a
shell corporation, to acquire the funding needed for growth and product development.
