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3. Business Combinations Involving Shell Companies (New Rule 145a)
The final rules include new Securities Act Rule 145a, which specifies that, for Securities Act purposes, a sale occurs to the SPAC’s existing shareholders when the SPAC enters into a business combination transaction involving another entity that is not a shell company, regardless of whether or not the existing SPAC shareholders receive new securities. In these situations, Rule 145a deems there to be a share exchange implicating Section 5 of the Securities Act’s requirements and protections because the interests the former SPAC shareholders owned have been exchanged for something entirely different: interests in an operating company in the course of a transaction whereby the former SPAC provides the operating company with access to the public markets. The sale identified by the rule occurs regardless of whether securities are changing hands in the business combination transaction, and thus the transaction will need to be registered in accordance with the Securities Act unless an exemption from registration is available.