Cross-border SPAC Transactions: Key Legal Considerations

Over the past several years, special purpose acquisition companies (SPACs) have emerged as an alternative route for private companies seeking access to the U.S. public markets. While SPAC activity slowed after the peak years of 2020 and 2021, cross-border SPAC transactions continue to attract interest from companies outside the United States. For international businesses, particularly those in Asia, Europe, and emerging markets, a de-SPAC transaction can offer a faster and more flexible pathway to becoming publicly traded.

However, cross-border SPAC deals also present unique legal and regulatory complexities. Compared to domestic transactions, these deals require careful coordination across multiple jurisdictions and regulatory frameworks. Companies considering a cross-border SPAC transaction should understand several key legal considerations before proceeding.

Regulatory and Securities Law Compliance

One of the most important aspects of any cross-border SPAC transaction is compliance with U.S. securities laws and regulations. Because the combined company will typically be listed on a U.S. exchange such as Nasdaq, the transaction must comply with U.S. disclosure requirements under the Securities Act and the Securities Exchange Act.

The de-SPAC process generally involves filing a registration statement or proxy statement with the U.S. Securities and Exchange Commission (SEC). These filings must include detailed information about the target company’s business, financial condition, management, risk factors, and financial statements. For foreign companies that have not previously operated under U.S. disclosure standards, preparing these filings can be a significant undertaking.

Financial statements may also need to be prepared in accordance with U.S. GAAP or reconciled from another accounting standard. Companies should work closely with legal and accounting advisors to ensure that financial reporting and disclosures meet SEC expectations.

Corporate Structure and Jurisdictional Issues

Cross-border SPAC transactions often require restructuring the target company’s corporate structure prior to closing. In some cases, this may involve establishing a new holding company in a jurisdiction such as the Cayman Islands, the British Virgin Islands, or another offshore jurisdiction commonly used in cross-border transactions.

The structure of the combined company must be carefully designed to address tax considerations, investor expectations, and regulatory requirements in both the United States and the target company’s home country. Additionally, local corporate laws may impose restrictions on share transfers, foreign ownership, or approval processes that need to be addressed during the transaction.

Early planning of the corporate structure can help avoid delays later in the transaction process.

Cross-Border Regulatory Approvals

Depending on the jurisdiction of the target company, cross-border SPAC transactions may require additional regulatory approvals beyond those required in the United States. These approvals can include foreign investment reviews, industry-specific regulatory clearances, or government approvals for overseas listings.

For example, companies in certain sectors may need approval from national regulators before transferring shares or listing abroad. Some jurisdictions also impose rules on outbound investments or foreign exchange controls that can affect how proceeds are distributed or transferred.

Because these approvals can take time to obtain, transaction timelines should account for potential regulatory review periods.

Disclosure and Liability Considerations

Disclosure risk is another important consideration in cross-border SPAC transactions. U.S. securities laws impose strict liability standards for material misstatements or omissions in public filings. For foreign companies unfamiliar with these standards, the level of scrutiny can be significantly higher than what they may be accustomed to in their home markets.

Companies must ensure that disclosures related to financial performance, projections, risk factors, and regulatory issues are accurate and complete. Consistency across investor presentations, SEC filings, and public communications is critical.

In addition, cultural and operational differences between jurisdictions can create misunderstandings regarding disclosure expectations. Working with experienced counsel can help identify potential risks and ensure that disclosures meet regulatory requirements.

Transaction Execution and Market Considerations

Beyond regulatory issues, cross-border SPAC transactions also involve practical considerations related to deal execution. Investor expectations, redemption risks, and financing arrangements such as PIPE investments can all influence whether a transaction successfully closes.

In recent years, many SPAC deals have required additional financing to offset shareholder redemptions. Cross-border targets should therefore evaluate potential financing strategies early in the transaction process.

Effective communication with investors and careful transaction planning can significantly improve the likelihood of a successful outcome.

Conclusion

Cross-border SPAC transactions offer international companies an attractive opportunity to access U.S. capital markets. However, these deals require careful planning and coordination across multiple legal and regulatory frameworks. Issues involving securities law compliance, corporate structure, regulatory approvals, and disclosure obligations can all play a critical role in determining whether a transaction proceeds smoothly.

Our firm regularly advises clients on cross-border SPAC transactions, including transaction structuring, regulatory compliance, and disclosure strategy. If you are considering a cross-border SPAC transaction or have questions about navigating the U.S. capital markets, our team would be happy to discuss how we can assist. 

Contact Person: Nick L. Torres, Esq. and Zhiqi Zheng, Esq.