In In re Forum Mobile, C.A. No. 2020-0346-JTL (Del. Ch. Feb. 3, 2022), petitioner Synergy Management Group LLC sought to revive a defunct Delaware corporation in order to use it as a blank check company. Synergy sought to have its president, Benjamin Berry, appointed as a custodian for the defunct corporation, Forum Mobile, Inc., utilizing Section 226(a)(3) of the Delaware General Corporation Law. Section 226(a)(3) provides that the Delaware Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians of a corporation when the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute it assets. Although Vice Chancellor Travis Laster denied the petition based on the language of the statute, his opinion appears to abandon the court’s previous policy against permitting the revival of defunct Delaware corporations for use as blank check companies.
A blank check company is a corporate shell used by investors to raise money in the capital markets to acquire or fund another business. A special purpose acquisition company or SPAC, much in the financial news these days, is a species of blank check company. In the case of Forum, its only value lay in the fact that its shares continued to have a CUSIP number that allowed them to be traded over the counter. Through a reverse merger with Forum, a new business could access the public markets without undergoing the rigors of a new IPO.
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