Corporate Hijacking and Public Shell Companies

Corporate hijackings also known as corporate identity theft is a growing method used by fraudsters to acquire control of public shell companies for reverse merger transactions. Corporate identity theft can take various forms. Thanks to the Internet, it is relatively easy to track down information about a public company using Edgar, OTC Markets filings, secretary of state filings, your company website, business directories and other directories. Using these sources, fraudsters are able to determine a public company’s corporate status, its ticker symbol as well as its officers, directors and contact information. Using secretary of state information, fraudsters can learn if a company has allowed its corporate status to lapse making it an easy target for corporate hijackers.

Fraudsters are able to change the names of directors or the registered business address of a company by filing out the requisite forms as required by the relevant secretary of state often with payment of a nominal fee and no oversight. Once this happens, it is hard to detect and difficult to reverse especially if the company has undergone corporate changes such as stock splits and name changes which result in a new ticker symbol as a well as notices being provided to the Financial Industry Regulatory Authority (“FINRA”), the company’s transfer agent and Cusip Services. Often regaining control is timely and costly. These public companies are often used in pump and dump schemes and sold as shells to private companies seeking to become public. Often the purchasers of the hi-jacked companies become embroiled in SEC investigations and the issuers become the subject of SEC trading suspensions which cause increased costs due the need for specialized SEC lawyers experienced in such matters.

Issuers considering reverse mergers should look for these common red flags often found in corporate hijackings of public shell companies:

♦ lawyers selling control shell companies that they directly or indirectly control;

♦ state receivorship or custodianship proceedings followed by large stock issuances which transfer control;

♦ recent transfers of stock between entities or persons who received shares for services rendered in receivorship proceedings;

♦ periods of inactivity in the Secretary of State corporate records of the public shell company;

♦ reinstatement of an administratively dissolved corporate entity with the Secretary of State where the public shell company is domiciled;

♦ changes in the state of domicile of the public shell company;

♦ multiple corporations domiciled in the same state with the same or similar names

♦ transfer agent principals, family members and/or employees having voting control or beneficial stock positions of the public shell company;

♦ changes of control or corporate name changes at times when the shell company does not have an active business; and

♦ involvement of persons or entities in multiple shell company or reverse merger transactions.

For further information about this article, please contact an SEC attorney at (561) 416-8956 or by email info@securitieslawyer101.com. The information herein is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings or please contact a securities lawyer at Hamilton and Associates at (561) 416-8956 or by email at info@securitieslawyer101.com. Please note that the prior results discussed herein do not guarantee similar outcomes.