by:
Dave Lavinsky
A shell corporation is a institution that is incorporated but has no significant assets or operations. These corporations may be formed as an alternative venture finance
mechanism.
Shell institution finance
works in two ways. In many a cases, the shell corporation is created from scratch. The intention of these shells is to raise money and to get a number of shares outstanding into the public’s hands. In most cases, the shares are sold-out
in units. That is, the shares are sold-out
as one share of common stuck plus warrants at the current offering price.
The “empty” shell is then incorporated with the in operation company. The incorporated companies begin to report in operation results and once
the results are good, existing stockholders exercise their warrants and provide necessary capital into the company.
A second type of shell corporation is formed once
the institution seeking capital identifies an existing shell or inactive public institution (IPC) as a candidate for a reverse acquisition. This typically occurs after a public institution emerges from bankruptcy. At this time it may be void of assets different than cash. In fact, the principal quality
of the IPC is its often its public registration and a list of shareholders from which new capital may be raised.
Shell corporations are a quick and cost effective way of taking a institution public and raising public capital. However, typically bridge capital is required to finance the process and take the institution to a point wherever
investors are interested in effort their options.
Just about the author: GT Business Plans has developed over 200 business plans for clients that have conjointly raised over $750 million in financing, launched many
new product and service lines and gained competitive advantage and market share. GT Business Plans is the sister site of GT Venture Capital
