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STRUCTURING THE SHELL
TRANSACTION
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Private companies that are not located in the United States should consider merging with a non-U. S. based shell. A U. S. domiciled shell will have a U. S. TIN (tax identification number.) Once a company has been issued such a number it is very difficult if not impossible to ever eliminate it. If the company is successful, it will eventually want to pay dividends to its shareholders. In the case of a U. S. domiciled shell, the earnings upstreamed to the U. S. parent to pay these dividends will become subject to U. S. taxation. Foreign domiciled shells can trade on the U. S. stock markets. They are also permitted to prepare their financial statements according to international accounting standards. One advantage of using international standards is that assets may be stated at their market value instead of their historical cost. Private companies located in countries where there have been large currency devaluations to the U. S. dollar would otherwise have their asset values reduced to near zero and if their debt was tied to hard currencies the result will be a large negative net worth. In addition, foreign domiciled companies are not subject to either the Proxy Rules or to Regulation FD.
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