The SEC has approved final regulations regarding SPACs, shell companies, and the utilization of projections - Part 4.

On January 24, 2024, the SEC finalized rules to improve disclosure requirements for SPAC initial public offerings (IPOs) and subsequent de-SPAC business combinations. These rules aim to align disclosure standards and legal responsibilities in de-SPAC transactions more closely with those in traditional IPOs. The regulations extend beyond SPACs to encompass shell companies and blank check companies in general. The compliance deadline for these rules is set for July 1, 2025.

The new regulations introduce Subpart 1600 to Regulation S-K, outlining disclosure obligations for SPACs concerning sponsors, potential conflicts of interest, dilution, and other aspects. Additionally, they require specific disclosures on the prospectus cover page and summary, including details about the timeframe for completing a de-SPAC transaction, redemptions, sponsor compensation, dilution, and conflicts of interest.

The prospectus summary for SPAC IPOs or other registered offerings must cover various topics, such as how the SPAC will identify and evaluate potential business combination candidates, terms of trust or escrow accounts, details of securities being offered, and plans for additional financings. Similarly, for de-SPAC transactions, the summary should include background and material terms of the transaction, fairness assessments, conflicts of interest, compensation details, financing transactions, and rights of security holders.

Furthermore, the rules mandate disclosure of the background, reasons, terms, and effects of de-SPAC transactions, covering negotiation details, financing arrangements, reasons for the transaction, differences in rights of involved parties, tax consequences, interests held by SPAC sponsors and officers, and security holders' redemption or appraisal rights.