OTC Markets microcap companies are often former shells. Unfortunately for their shareholders, Rule 144 opinion letters cannot be used to clear stock for former blank check shells unless the Issuer is an SEC filer and meets the requirements of the Evergreen Rule.
However, an experienced securities lawyer may have other options under Section 4(a)(1).
A blank check company or “blank check shell” is a development stage company that has
- no specific business plan or purpose or
- has indicated its business plan is to engage in a merger or acquisition with an unidentified company.
These blank check companies are also commonly known as “419 shells” or “Form 10 shells.”
The Evergreen Rule in Layman’s Terms
Even once these companies do merge with an operating business, they are forever known as “former shells” and Rule 144 opinions can only be issued under certain circumstances under the “Evergreen Rule.”
The Evergreen Rule basically means that unless an Issuer is an SEC filer, and has filed “Form 10 Information” including audited financials for one year post shell status, and is current in its SEC filings, Rule 144 can never be used. As soon as a former shell becomes delinquent in its SEC filings, Rule 144 is not an option.
Unless the Evergreen Rule is satisfied, the SEC does not allow shareholders of former 419 shells to use use Rule 144 as an exemption from the registration requirements when selling stock.
Section 4(a)(1) May Be Used to Clear Stock of Former Shells
A Section 4(a)(1) legal opinion may be possible if the securities are greater than 2 years old and the Shareholder is not an underwriter or dealer.
A microcap securities attorney familiar with issuing legal opinions for former shells under Section 4(a)(1) can review your documents at no cost to determine if this alternative to Rule 144 can be used.