What Is SEC Form 15-12B?
SEC Form 15-12B is a certification of termination of registration of a class of security under Section 12(g) or notice of suspension of duty to file reports pursuant to Section 13 and 15(d) of the 1934 Securities Exchange Act Section 12(b). This form is used when a company goes private and must register existing securities.
- A company that chooses to voluntarily delist and deregister securities under the Securities and Exchange Act must file Form 15-12B with the SEC
- A company that goes private can elect to stop providing certain information to the SEC, conditional that it has no more than 300 shareholders at the start of the fiscal year after filing for delisting.
- Companies deregister securities when it becomes financially prohibitive to remain a public reporting company and stay listed on a national securities exchange.
How SEC Form 15-12B Works
Under Section 12(b) of the Securities Exchange Act, when an issuer files to register their security with the Securities Exchange Commission (SEC) they must provide pertinent financial data. This data may include information on the corporate structure and management compensation along with the balance sheets and profit/loss statements from the past three years.
When a company files Form 15 or goes dark, it can suspend these reporting obligations as long as it does not have more than 300 shareholders of the deregistered class of securities on the first day of any fiscal year after it has filed Form 15. SEC Form 15-12B is filed by companies with a Commission File Number prefix of 001-.
Why Companies "Go Dark"
Companies "go dark", or voluntarily delist their shares from exchanges when the costs of remaining a public reporting company and staying listed on the national securities exchange outweigh its benefits. In order to do so, the issuer must also unregister these securities according to the Securities and Exchange Act of 1934
For example, during the Great Recession of 2008-2009, many smaller publicly-traded companies went dark or considered going dark, in response to the increasing financial burden of remaining a public reporting company. For smaller companies especially, the costs of keeping up with listing requirements and public reporting requirements can become a burden during difficult financial times. Delisting and deregistering allow a struggling company to redirect its dwindling resources away from SEC reporting and listing requirements.
Delisting alone does not relieve a company of its public reporting requirements; it must also deregister its shares as required by the Exchange Act. A non-listed company may have reporting obligations to the SEC. Often, a company may undergo a going private transaction, in which it cashes out most or all of its public shares in order to begin the process of going dark. Going private can occur via a merger, a reverse split of the company’s shares, or a tender offer.
A company that goes private does not need to cash out its shareholders, and indeed, many such companies do not have the liquid funds to do so. Nor does such a company need to first put the matter to a shareholder vote or provide for a fairness opinion. However, some companies may provide shareholders with a stock repurchase, tender offer, or another offer of liquidity.