The following rules apply if CDED can be defined as a "shell company", i.e. a company with no or nominal operations, and with no or nominal assets or assets consisting solely of cash and cash equivalents.
The private company shareholders receive a majority of the shares of the public company and the control of the board of directors.
Upon completion of the reverse merger, the name of the merged company is changed to reflect the name of the new company.
If the shell company has a trading symbol it is changed to reflect the name change.
An information statement, called an 8-K, must be filed within 15 days of the closing. The 8-K describes the newly combined company, stock issued, information of new officers and directors, and financial information.
The Financial statements must be audited to US GAAP, standards, and the SEC allows a maximum of 75 days to amend the 8-K with audited financials if necessary.
If the shell company is listed on the Bulletin board, the registered or “free trade” shares can continue to trade.
The company can do a private placement immediately.
To trade new shares offered by the public company, the newly combined public company must first register the shares with the SEC. This process takes three to four months and normally requires filing a Registration statement with the SEC under Reg. SB-2 or SB-1.
The merger transaction can be accomplished in as little as two weeks, resulting in the private company becoming a public company. The transaction does not go through a review process with state and federal regulators because the public company has already completed the process. The transaction involves the private and shell company exchanging information on each other, negotiating the merger terms, and signing a share exchange agreement.
Interesting note. One of the requirements for the shell company is that all officers must resign their posts
Agreement for the Officers and Directors of the public shell to be replaced with the Officers and directors designated by the private company merger partner.
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