Tip of the Week – Consider a Self-Filing
By David Feldman at 12 April, 2009, 6:33 am
As I describe in my book, there are circumstances where avoiding a merger with a shell makes sense and may even be preferable. In this case, consider what we call a self-filing, in which a private company effects a filing with the SEC either to permit certain existing shares to become tradable, or to simply register a class of the company’s stock with the SEC, making the company a full reporting company which may be eligible for its stock to trade on the OTC Bulletin Board.
The self-filing takes longer than a shell merger, and can take as long as 5-8 months. It is unpredictable because it depends on how difficult the SEC makes the process of reviewing and approving your disclosure document. With a shell merger, the transaction can be completed usually in 2-3 months with no regulatory involvement prior to closing. But if you do not have a current need for financing, or can obtain financing while remaining private and during the registration process, have or can obtain at least 40 unaffiliated shareholders with at least 100 tradable shares, and ideally have a strong Wall Street hand guiding you, self-filing may indeed make sense.
Recent changes in regulations make self-filing even more attractive at times. First, the SEC recently made it easier to raise money while your registration is pending. There used to be more restrictions on this, making self-filing less valuable at times. Also, new restrictions on former shell companies, while not overwhelmingly burdensome, have made avoiding a shell if possible worth considering. A group of law firms including mine have petitioned the SEC to look to change one of these rules in particular. But until that occurs more and more companies will and should consider the value of self-filing.
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