Shell Companies


Relevant Rule 144 Provisions

When Rule 144 was amended in February 2008, provisions were added to limit or prohibit the use of Rule 144 by companies that were or had been shells. The relevant provision is Rule 144(i). 


In Plain English

Shareholders in a company that has ever at any time been a shell cannot sell under Rule 144 unless the company has become a registered company and filed Form 10 for one year.

The means that shareholders in a non-reporting company that has been a shell at any time cannot sell under Rule 144.

Further, the SEC in phone conversations says that you cannot use Rule 144 even if the stock was issued when the company was not a shell.

A shell is a company that has (1)no or nominal operations and no or nominal non-cash assets, or (2) assets consisting solely of cash and cash equivalents; or (3) assets consisting of any amount of cash and cash equivalents and nominal other assets; or (4) an issuer that has been at any time previously such an issuer.

However, a bona fide start up company is not a shell.

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