What are Footnote 32 Shells?
Footnote 32 is part of the SEC rule-making passed in June, 2005. The rule provided a clear definition of a shell company, defining it as a shell company as one with no or nominal operations and/or nominal assets (other than cash). Opponents of Footnote 32 shells claim that they are merely business plans created for the sole purpose of selling the shell after it gains trading status. They believe there are only 2 legitimate ways to create a public shell, 1) through Rule 419 (the old blank check company rules which require SEC approval at the time of creation and the time of the private company acquisition), or 2) filing a Form 10-SB to create a reporting company whose business plan is to acquire an operating business. The problem is that shells manufactured in both these legal manners cannot obtain a trading symbol before the reverse merger (except for the SPAC, which raise a substantial amount of money and are allowed to trade so long as the price is $5.00 or greater). The problem they
