May 26, 2004
I am opposed to the proposed amendments.
Rule 419 clearly describes procedures for the sale of securities by blank check corporations. It includes sales pursuant to a Form S-8 registration statement. It doesnt have to be expanded.
Further, sec. 7b3 of the Securities Act of 1933 clearly defines a blank check company.
The concept of expanding the defintion of a blank check or shell corporation to include entities without operations, assets, cash or cash equivalents appears to include small start-up corporations not previously defined as blank check corporations. It appears that start-up companies, especially start-up natural resource companies seeking to raise funds for initial exploration projects, will be included within the catagory of shell corporations and will be stifled in capital raising activities.
Further, the definition of a shell corporation is not a bright line test. As such it will be open to interpretation by the staff at the Division of Corporate Finance. Currently, the staff at the Division of Corporate Finance has difficulty defining a blank check company under the current rules. Start-up companies are constantly advised that they are blank check companies, even though they have a specific plan or purpose and the purpose is not to engage in a merger or acquisition. Under the new proposed definition, I suspect the confussion at the Division of Corporte Finance will be further compounded.
The Commission continues to propose rules under the guise of preventing fraud. What in fact occurs is the fraud continues, but honest small start-up companies are prevented from raising capital for legitimate start-up activities.
In conclusion, I am opposed to the amendments