Legal Question in Securities Law in California

Re: Spac

Do a Google search on "SPAC" and "Understanding Reverse Mergers" and look for a paper emanating from the University of Madrid. It's the best description I could find for a relatively uncommon term ("special purpose acquisition corporation") for an old and well-recognized going-public technique.

In earlier times (such as a couple years ago), these SPACs were known by less savory terms as "blind pools" or "shell corporations."

In terms of how it is formed, I can only speak for California, but it would be formed in much the same way as any other for-profit corporation. Its incorporators would avoid specifying a particular type of authorized business activity in the Articles of Incorporation, but this is the modern style now anyway.

The next step for such corporations is to register and sell stock to enough investors to qualify as a public corporation. This is increasingly difficult, as the securities laws take an increasingly harsh view of companies that take investor money for unspecified future purposes.

To be sure, some "public shell" companies come into existence as a result of a former full-fledged operating business selling off all its operations and assets and paying all (hopefully) its liabilities. Shells thus created avoid the regulatory opprobrium of selling stock for unspecified future purposes, but have the excess baggage of prior operations which means possible undisclosed (or unknown) liabilities.

All this said, use of a public shell is a legitimate alternative way for a valid, heads-up business to go public quickly.

The whole field is very technical and full of regulatory pitfalls (as well as opportunities), so a full discussion on a bulletin board is not practical. I would welcome a direct contact to carry on this discussion. No charge for initial consultation, of course.