How to Deregister Securities Using Rule 12g-4(a)(1)
Understand the regulatory path for a company to suspend and terminate its public reporting duties through voluntary securities deregistration.
Securities deregistration is a formal process allowing a public company to terminate its registration with the Securities and Exchange Commission (SEC). The primary motivation is to cease the costly reporting obligations mandated by federal securities laws, such as filing the annual Form 10-K and quarterly Form 10-Q. This reduces administrative burdens and compliance costs.
By meeting specific SEC requirements, a company can remove its securities from SEC oversight, effectively transitioning from public to private status in terms of reporting. This path is governed by rules that ensure the decision is appropriate based on the company’s public shareholder base. The process is initiated voluntarily when a company determines it qualifies for relief from public reporting duties.
Eligibility for Voluntary Deregistration
A company’s ability to voluntarily deregister a class of securities depends on meeting criteria in the Securities Exchange Act of 1934. The most direct path is provided by SEC Rule 12g-4(a)(1), which sets a numerical threshold for shareholders. To qualify, a company must certify that the class of securities is held of record by fewer than 300 persons. For banks and bank holding companies, this threshold is extended to fewer than 1,200 persons.
The concept of a security being “held of record” is defined under SEC Rule 12g5-1. A record holder is the person or entity on the company’s stock ledger. When shares are held by a broker in “street name” for multiple clients, the brokerage is counted as a single record holder. For shares held by an institutional depository, the rules require the company to “look through” and count each participant account as a distinct record holder.
This method of counting allows companies whose shares are widely held by the public through brokerage accounts to still qualify for deregistration. An alternative path exists under Rule 12g-4(a)(2), which permits termination if the company has fewer than 500 record holders and its total assets have not exceeded $10 million on the last day of each of its three most recent fiscal years. The test under Rule 12g-4(a)(1) remains the most commonly used standard due to its simplicity.
Preparing the Certification on Form 15
The deregistration process is initiated with Form 15, the official certification and notice to the SEC. The company must accurately provide its identifying information, including its full legal name, primary business address, and its Central Index Key (CIK). The form also requires the exact title of the class of securities being deregistered.
A key step is checking the appropriate box to indicate the legal basis for the filing. For companies proceeding under the shareholder count threshold, the box for Rule 12g-4(a)(1) must be selected. This action formally certifies that the company has met the shareholder count requirement and requires the company to state the approximate number of record holders as of the certification date.
The Form 15 must be signed by a duly authorized person, such as a corporate officer, who attests to the accuracy of the information provided. This signature confirms that the company has conducted a diligent review of its shareholder records. An inaccurate certification can lead to SEC enforcement action, making the verification of the shareholder count an important preparatory step.
The Deregistration Filing Process
Once the Form 15 is accurately completed and signed, the next step is the formal submission to the SEC. The filing must be done electronically through the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Companies or their filing agents must have EDGAR access codes to log in and submit documents on the platform.
The filer would select the corresponding submission type, which designates it as a certification to terminate registration under Section 12(g) of the Exchange Act. The system guides the filer through the process of uploading the completed Form 15.
Upon successful submission, the EDGAR system will generate an acceptance message, confirming that the filing has been received. This message serves as the official receipt and marks the beginning of the deregistration timeline. The company should retain this confirmation for its records as proof of the filing date.
Suspension and Termination of Reporting Obligations
The filing of Form 15 has immediate consequences for the company’s reporting duties. Under Rule 12g-4(b), the obligation to file periodic and current reports, such as Forms 10-K, 10-Q, and 8-K, is suspended immediately upon the successful submission of the Form 15. This immediate relief is one of the primary benefits of the deregistration process.
While the duty to file most reports ceases at the moment of filing, the deregistration itself is not yet final. The termination of the security’s registration under Section 12(g) becomes effective 90 days after the Form 15 is filed. This 90-day period acts as a waiting period, during which the SEC can review the filing and object if it finds the company does not meet the eligibility requirements.
If the SEC raises an objection, the company must, within 60 days, file all the reports that would have been required had the Form 15 not been filed. Assuming no objections are raised, the deregistration becomes final at the end of the 90-day window. While the duty to file reports under Section 13(a) is suspended immediately, other obligations, such as those related to proxy rules and beneficial ownership reporting under Sections 14 and 16, remain in place until the 90-day period concludes.