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Frequently Asked Questions
  Staff Interpretation Letter 2008-11  
Identification Number 756
This is in response to your correspondence regarding the eligibility of Director One and Director Two (collectively, the “Directors”) to serve as independent directors on the company’s board of directors (the “Board”) under the requirements of Marketplace Listing Rule 4200(a)(15)(A) (the “Rule”).  The company currently trades on the OTCBB and has applied for listing on NASDAQ.
 
According to the information you provided, the company was initially formed as a special purpose acquisition company (the “SPAC”) for the sole purpose of conducting an initial public offering (“IPO”) to raise funds to acquire one or more unidentified operating companies.  The IPO was completed approximately two years ago, and the proceeds were deposited into a trust account pending an acquisition.  Approximately four months ago, the SPAC completed its acquisition of an operating company (the “Target”) and changed its name.
 
You stated that prior to the merger, the SPAC had no operations, no employees, and no assets other than an indirect interest in the trust account.  The Directors were executive officers, but not employees, of the SPAC, and received no compensation from the SPAC for serving as officers.  The Directors were designated as officers to facilitate an acquisition or, if no acquisition were to occur, to liquidate the trust account and distribute the net proceeds to the SPAC’s shareholders.  Upon the closing of the acquisition, the Directors resigned as officers.  Following the acquisition, the sole operations of the company were the operations of the Target, and the CEO, President/COO, CFO, and General Counsel of the Target took those roles with the company.  The company’s financial statements carry forward the historical financial statements of the Target.
 
Following our review of the information you provided, we have determined that the mere fact of the Directors’ prior service without compensation as non-employee officers of the SPAC will not preclude the Board from finding that the Directors are independent under the Rule.  This conclusion is based on your representation that the Directors were not employees of the SPAC or the company and received no compensation for serving as executive officers.  Further, we note that the Directors resigned their positions upon the closing of the acquisition.  As such, the Rule does not preclude the Directors from being considered independent directors in this case.  Please note that pursuant to IM-4200, a company’s board has a responsibility to make an affirmative determination that no relationship exists that would impair the independence of any individuals serving as independent directors.  We are not expressing any opinion as to whether it would be appropriate for the company’s Board to make such a finding regarding the Directors.
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 756
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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