Reverse Mergers and OTC Markets: Compliance After the Transaction

A reverse merger occurs when a private operating company merges with a publicly traded shell company, acquiring control and assuming its reporting obligations. While reverse mergers offer a quicker path to becoming publicly traded, post-merger companies must comply with Rule 15c2-11 and OTC Markets’ current-information standards before quotations can resume.

Why Post-Merger Compliance Matters

Following a reverse merger, the private company inherits the shell’s public profile, disclosure obligations, and potential liabilities. Until updated information is filed and deemed current under Rule 15c2-11, broker-dealers cannot publish or resume quotations, and trading may be limited to the Expert Market.

Rule 15c2-11 Requirements After a Reverse Merger

Under Rule 15c2-11, broker-dealers must review current issuer information before publishing a quotation. Post-merger, the combined company must provide updated financials, business descriptions, management and control person data, material contracts, and risk factors consistent with Regulation S-K. If no sponsoring market maker files Form 211, the issuer may request an Initial Information Review from OTC Markets Group.

OTC Markets Current-Information Standards

The OTCID Market (formerly Pink Current Information) requires post-merger issuers to file full disclosures through OTCIQ, including two years of financial statements, updated share structure, Material Event Reports, and a Manager’s Certification. Without these, OTC Markets will not designate Current Information status, preventing quotation.

Post-Merger Compliance Process 

The post-merger compliance process includes the following steps:

• Corporate Actions and Name Change: File through FINRA’s Corporate Actions Department and OTC Markets.
• Update Share Structure: Disclose authorized, issued, and outstanding shares, convertible instruments, and pending financings.
• Notify OTC Markets Group of the completed merger or Change in Control by completing a Supplemental Disclosure for Change of Control Events and emailing it to OTC Markets Group at [email protected].
• Submit a new OTCIQ application, together with the applicable fee,  and upload the relevant OTCIQ Disclosures, including:  Supplemental Disclosure for Change of Control Events, merger documents, business descriptions, and pro forma financials via the OTCIQ Portal.
• Verify your OTC Markets Company profile and submit a new Manager’s Certification.
• OTC Markets Review: OTC Markets reviews filings and assigns a compliance tier – respond to any comments or requests for additional information.

Avoiding Common Post-Merger Compliance Mistakes

• Failing to disclose control changes or new beneficial owners.
• Filing incomplete or outdated financial statements.
• Delaying submission of the OTCIQ application, Change of Control disclosures, and Manager’s Certification.
• Issuing shares post-merger without proper disclosure or Rule 144 compliance.
• Not aligning FINRA and OTC Markets corporate action filings.

Shell Company Status and Rule 144(i)

Post-merger shell companies remain ineligible for Rule 144 resales until they meet the Rule 144(i)(2) current-information condition for at least 12 months after filing comparable disclosures. Issuers should maintain current reports to prevent delays in shareholder liquidity.

Regulatory and Market Resources

• OTC Markets Reporting Guidelines
• OTC Markets
• FINRA Corporate Actions Portal
• SEC Rule 15c2-11 Final Release 33-10842
• SEC Rule 144

Conclusion

Reverse mergers provide an efficient path to public trading, but post-merger compliance determines long-term success. Issuers must update disclosures, provide accurate financials, and maintain current-information status to ensure trading eligibility. Hamilton & Associates Law Group advises issuers and investors on reverse merger compliance, Rule 15c2-11, and OTC Markets disclosure requirements.

To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].

Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
200 E Palmetto Rd, Suite 103
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com