When a significant volume of capital is raised from investors through nontraditional capital markets transactions, the U.S. Securities and Exchange Commission (SEC) is sure to follow with increased scrutiny.
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On March 31, 2021, the Securities and Exchange Commission (SEC)
provided public statements from Acting Chief Accountant Paul Munter and from
the Division of Corporation Finance addressing
Special Purpose Acquisition Companies (SPACs). Although each of the
statements were distinct and addressed different issues, the
primary focus of both was to raise awareness of critical
accounting, financial reporting and governance considerations that
a private operating company should carefully consider and address
prior to consummating a business combination with a SPAC.
SPACs are shell companies that raise capital through an initial
When a significant volume of capital is raised from investors through nontraditional capital markets transactions, the U.S. Securities and Exchange Commission (SEC) is sure to follow.
Friday, April 9, 2021
On March 31, the staff of the Division of Corporation Finance (the Staff) of the Securities and Exchange Commission issued a staff statement (the Staff Statement) relating to accounting, financial reporting and governance issues for private companies to consider before engaging in a business combination with a special purpose acquisition company (SPAC).
Shell Company Restrictions
The Staff Statement serves as a reminder of important limitations under the federal securities laws that apply to SPACs, given their status as shell companies under the federal securities laws, and that should be considered in the context of a business combination. These shell company limitations include: