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SEC Staff Views: Staff Statement on Select Issues Pertaining to Special Purpose Acquisition Companies NEW!


SEC Staff Views: Staff Statement on Select Issues Pertaining to Special Purpose Acquisition Companies

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has published guidance on certain accounting, financial reporting and governance issues that should be carefully considered before a private operating company undertakes a business combination with a special purpose acquisition company (SPAC). Corp Fin cautions that SPACs are subject to certain limitations that should be considered by the SPAC and the private companies engaging in business combinations with SPACs before undertaking in such a transaction. These include:

  • Financial statements for the acquired business must be filed within four business days of the completion of the business combination pursuant to Item 9.01(c) of Form 8-K. The registrant is not entitled to the 71-day extension of that Item.
  • The combined company will not be eligible to incorporate Exchange Act reports, or proxy or information statements filed pursuant to Section 14 of the Exchange Act, by reference on Form S-1 until three years after the completion of the business combination.
  • The combined company will not be eligible to use Form S-8 for the registration of compensatory securities offerings until at least 60 calendar days after the combined company has filed current Form 10 information.
  • The combined company will be an “ineligible issuer” under Securities Act Rule 405 for three years following the completion of the business combination, which has certain consequences during that period.

Other topics discussed in this guidance include: (a) books and records and internal control requirements; and (b) initial listing standards of National Securities Exchanges.

In connection with Corp Fin’s guidance, SEC Acting Chief Accountant Paul Munter has issued a statement, Financial Reporting and Auditing Considerations of Companies Merging with SPACs. Munter indicates that in just the first two months of 2021, both the number of new SPACs and amount of capital raised by those SPACs have been reported to already match approximately three-fourths of all such activity last year.

Munter indicates that regarding SPAC transactions, it is “critical that the board of directors, audit committee (as applicable), management, and auditors of these operating companies fully understand and fulfill their respective professional responsibilities so that companies meet their obligations under the federal securities laws and investors are provided with high quality financial reporting at the time of the merger and on an ongoing basis in subsequent periods.”

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