The Securities and Exchange Commission filed with the U.S. Bankruptcy Court an objection to Sable Natural Resources’ First Amended Joint Chapter 11 Plan of Reorganization and Disclosure Statement.
The objection asserts, “Sable is a publicly held shell corporation that has had no regular business operations since the petition date. But despite Sable’s lack of operations, the Plan provides for a full discharge of its liabilities and the sale of its public corporate shell to a private entity. As the federal agency charged with regulating the securities markets and enforcing the federal securities laws, the SEC has an interest in any bankruptcy cases where the sale of a public shell is proposed. A public shell, discharged of its liabilities and with an existing public shareholder base, can be used by a private company to go public via a reverse merger without having to comply with the registration requirements of the federal securities laws.”
In addition, “There is always a risk of harm to public investors from this circumvention of the registration requirements, but such risk is particularly high in this case because Sable has made very little information available to investors and creditors. Sable is over two years delinquent in its reporting requirements with the Commission, and the Plan and Disclosure Statement provide almost no information about the proposed purchaser of its new common stock. Compounding these concerns, the proposed purchaser is an entity whose sole principal was the subject of numerous fraud allegations involving multiple business entities, including shell companies, in his own personal bankruptcy proceeding. For a number of reasons, Sable’s Plan cannot be confirmed. First, as described above, the Disclosure Statement fails to include adequate information as required by Section 1125 of the Bankruptcy Code. Further, because Sable is now just a shell company, the Plan violates Section 1141(d)(3) of the Bankruptcy Code, which prohibits a discharge to a liquidating debtor with no ongoing business operations.”
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