Going Dark Brenda Hamilton
Submitted 2014-01-05 18:25:11 The Sarbanes-Oxley Act
Stars Valeri Nichushkin Jersey , the declining U.S. economy and increasing legal, auditing and other compliance costs reduced the number of
issuers electing to become Securities & Exchange Commission (“SEC”)
reporting issuers, particularly in the microcap markets. With new Rule 506(c)
pusuant ot the JOBS Act allowing general solicitation and advertising in private
placements, many issuers are evaluating whether any benefits of public company
status remain. In some instances
Stars Esa Lindell Jersey , issuers are seeking to voluntarily deregister with the SEC - commonly referred to as “going dark”.
The once perceived benefits of being an SEC reporting publicly traded company are dwindling as many
microcap issuers are able to use general solicitation and advertising for their
private placements. The less money the issuer has, the more difficult it becomes
to maintain an SEC reporting company status since the issuer spends more of its
financial, personnel, and outside resources to maintain its SEC reporting
status; resources of which may have served (or will be served) better to improve
and expand the issuer’s business.
Issuers who go private become non-reporting issuers and their securities are no longer publicly traded; however
Stars Antoine Roussel Jersey , “going dark” is distinct because the issuer’s securities continue to be publicly traded on the OTC Markets Pink
Sheets.
Unless an issuer’s certificate of incorporation or bylaws provide otherwise, a going dark transaction does not require approval by the issuer’s
shareholders. In most instances, a proxy or information statement is not
required.
Benefits of Deregistration
Some of the benefits of deregistration include:
? Significantly lower accounting, legal and compliance costs;
? Increased management attention to the issuer’s business and operations instead of SEC compliance and reporting;
? Flexibility to undertake reorganizations and other possible extraordinary corporate
transactions;
? Decreased SEC Corporate Governance requirements;
? More simplified and reduced disclosure requirements;
? Personal liability of officers and directors
Stars Cody Eakin Jersey , particularly those certifying SEC filings, is reduced and the costs associated with officer and director insurance will also
be reduced; and
? The issuer’s securities can continue to actively trade on the OTC Markets Pink Sheets.
How to Deregister
Issuers become subject to SEC reporting obligations in three ways.
? under Section 12(b) of the Securities Exchange Act of 1934, (the “Exchange Act”) if it has shares listed on
a national securities exchange;
? under Section 12(g) of the Exchange Act if it has 500 shareholders of record of a class of securities and total assets
exceeding $10 million; and
? under Section 15(d) by having a registration statement declared effective under the Securities Act of 1933, as amended (the
“Securities Act”).
Public companies can deregister if they have fewer than 300 shareholders of record
Stars Patrik Nemeth Jersey , or fewer than 500 holders of record and less than $10 million of assets in each of the prior three years. Many issuers with
thousands of shareholders qualify for deregistration because each brokerage firm
holding shares in street name counts as only one holder of record according to
the current interpretation of Rule 12g5-1.
Listed issuers can delist their securities voluntarily and deregister them under Section 12(b) of the Exchange
Act by filing a Form 25 with the SEC. The issuer must give 10 days notice of its
plans to delist by issuing a press release ten days prior to filing the Form 25.
The delisting becomes effective ten days after filing the Form 25. Most of the
SEC reporting obligations are suspended ten days after the issuers files a Form
25. The actual termination of registration under Section 12(b) does not occur
until 90 days after the effectiveness of the delisting.
Once delisted, an issuer can still be required to file reports pursuant to Section 12(g) of the
Exchange Act if it has more than 500 holders of record and total assets
exceeding $10 million, or pursuant to Section 15(d) of the Exchange Act if it at
any time the issuer had an effective Registration Statement under the Securities
Act. To avoid this result, the issuer may deregister under Section 12(g) and
suspend its reporting obligations under Section 15(d) if it has less than 300
shareholders of record. Section 15(d) reporting obligations may be suspended if
the issuer had less than 300 shareholders of record on the first day of its
fiscal year. Under either scenario
Stars Mattias Janmark Jersey , the issuer must file a Form 15 certifying that the class registered has less than 300 shareholders of record and, if
applicable, the issuer must also suspend its reporting obligations under Section
15(d).
Note that Section 15(d) reporting obligations can never be terminated; they can only be suspended. An issuer’s reporting obligations can be reinstated
if the issuer exceeds the limit on the number of record holders on the first day
of any fiscal year after it files a Form 15.
Note that under Rule 12h-3(c), a company may not suspend its Section 15(d) reporting obligations in any fiscal
year where it has a registration statement declared effective under the
Securities Act or “that is required to be updated” pursuant to Section 10(a)(3)
of the Securities Act.
Effectiveness of Deregistration
An issuer’s periodic reporting obligations under the Exchange Act will be suspended
immediately upon its filing of a c.
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