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Frequently Asked Questions
  What is a "public shell"?
Identification Number 484
 A company with no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets is a "public shell". Nasdaq believes that there should be a "facts and circumstances" analysis applied in determining whether a company is a public shell and has not adopted a bright-line or qualitative test for determining whether a particular company is a public shell. Similarly, in adopting rules regarding shell companies, the Securities and Exchange Commission also declined to adopt a quantitative threshold to define a shell company, as doing so would, "present a serious potential problem, as [a quantitative threshold] would be more easily circumvented". [Exchange Act Release No. 52038 (July 15, 2005), 70 FR 42234 (July 21, 2005)]
 
In making its determination, Nasdaq will look to a number of factors, including, but not limited to:
    • What percentage of the company's assets are active vs. passive;
    • Does the company generate revenues;
    • What is the nature of any revenues generated (passive vs. active);
    • Are the company's expenses reasonably related to the revenues being generated;
    • How many employees support the business operations;
    • What is management's role in the company's investments;
    • How long has the company been without material business operations;
    • Is the company subject to registration under the Investment Company Act of 1940; and
    • How has the company defined itself in its filings with regulators.
Listed companies determined to be public shells by Nasdaq may be subject to delisting proceedings or additional and more stringent criteria. If Nasdaq makes such a determination, the company will be notified in writing and may appeal Nasdaq's determination at that time. See  Hearings FAQs for additional information. Nasdaq recommends that companies contact their Listing Analyst or Listing Qualifications at +1 301 978 8008 with any questions regarding the determination process.
 
Publication Date*: 4/24/2023 Mailto Link Identification Number: 484
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