What Is Form 25 and Why Do Companies File It?

Public companies sometimes choose to remove their shares from stock exchanges and deregister with the SEC, a process that involves filing Form 25. This document serves as an official request to delist securities and reduces regulatory obligations. Investors holding shares in affected companies may see changes in how they can trade these stocks.

Why Companies File This Document

Companies file Form 25 to cut the costs and regulatory burdens of being publicly traded. Listing on an exchange like the NYSE or Nasdaq requires compliance with the Securities Exchange Act of 1934, which mandates quarterly and annual reports, disclosures of material events, and adherence to corporate governance rules. The associated expenses—such as audit fees, legal costs, and compliance staff—can be significant, particularly for smaller firms or those struggling financially.

A company may also delist as part of a strategy to go private. When a controlling shareholder or private equity firm acquires a majority stake, staying public may no longer align with long-term goals. Delisting allows the company to operate with more flexibility, free from the pressure of meeting quarterly earnings expectations. This is common in leveraged buyouts, where firms like KKR or Blackstone take public companies private to restructure operations outside of market scrutiny.

Regulatory non-compliance or failure to meet exchange listing standards can also prompt a company to file Form 25. Exchanges impose minimum requirements, such as Nasdaq’s $1.00 minimum bid price rule or specific market capitalization thresholds. If a company fails to meet these for an extended period, it risks involuntary delisting. Some companies choose to file Form 25 preemptively to control the timing and optics of their removal rather than waiting for the exchange to act.

Distinguishing Factors Between Delisting and Deregistration

Delisting and deregistration are related but distinct processes. Delisting removes a security from a national exchange, meaning shares will no longer trade on platforms like the NYSE or Nasdaq. This can be voluntary, where a company chooses to withdraw, or involuntary, where an exchange forces removal due to non-compliance. Deregistration, however, ends a company’s obligation to file reports with the SEC, removing its status as a publicly reporting entity.

A company can delist but still be required to submit SEC filings if it meets certain thresholds under the Securities Exchange Act of 1934. If a company has more than 300 shareholders of record—or 500 for smaller reporting companies—it must continue disclosing financial and operational information, even if its shares no longer trade on a major exchange. A firm can deregister only if its shareholder count falls below these thresholds, allowing it to cease public reporting entirely.

For investors, the distinction matters. If a company delists but remains SEC-registered, shareholders can still access audited financial statements and quarterly reports. Once deregistration occurs, these disclosures stop, making it harder to assess the company’s financial health. Reduced transparency can impact stock liquidity, as institutional investors and market makers often avoid securities with limited public information, leading to wider bid-ask spreads and lower trading volumes.

Steps Companies Follow to File

After deciding to delist, a company must follow a structured process to comply with SEC rules. The board of directors typically approves the decision, and in some cases, shareholder approval may also be required, particularly if the delisting is part of a merger or acquisition.

The company must then notify the exchange of its intent to delist, which involves a written notice and a waiting period. The NYSE requires companies to issue a press release and file a Form 8-K with the SEC to inform investors. Nasdaq mandates at least 10 days’ notice before the delisting takes effect.

Once the exchange is notified, the company files Form 25 with the SEC, triggering a 10-day period before the delisting becomes effective. However, filing Form 25 does not immediately end all reporting obligations. Under Rule 12g-4 of the Securities Exchange Act, a company must file a separate Form 15 to terminate or suspend SEC reporting duties. If Form 15 is accepted, the company is no longer required to file periodic reports, though it may still have obligations under state securities laws or debt agreements.

Role of the Exchange in the Process

Stock exchanges oversee the delisting process to ensure compliance with regulatory standards and internal governance rules. Exchanges require companies to justify their delisting and demonstrate that investor interests have been considered. If an exchange finds that a company has not followed proper protocol, it can delay or reject the request, requiring amendments or additional disclosures.

Exchanges also manage how delisting information is communicated to the market. They coordinate with issuers to publish notifications through corporate announcements and regulatory bulletins, ensuring investors are informed. Exchanges typically impose a waiting period before a stock is removed, giving market participants time to adjust. The NYSE and Nasdaq generally provide at least 10 days’ notice before executing a delisting to prevent abrupt disruptions in trading.

Post-Filing Trading Status

Once Form 25 is filed and the delisting takes effect, a company’s shares may still trade, but the way they are bought and sold changes. Instead of being listed on a national exchange, the stock may move to the over-the-counter (OTC) market, where securities trade through broker-dealer networks rather than centralized exchanges.

OTC markets, such as the OTCQX, OTCQB, or Pink Sheets, operate with fewer regulatory requirements, which can lead to reduced analyst coverage and wider bid-ask spreads. Institutional investors, which often have mandates restricting investments in exchange-listed securities, may exit their positions, further impacting liquidity. Companies that deregister with the SEC may no longer be required to provide audited financial statements, making it harder for investors to assess value and risk. While some firms voluntarily disclose information through OTC Markets Group’s Alternative Reporting Standard, others provide minimal transparency, increasing uncertainty for shareholders.