Chapter 17 - § 17.13 • DELISTING AND DEREGISTRATION, OR "GOING DARK"

• Jurisdiction: Colorado

§ 17.13 • DELISTING AND DEREGISTRATION, OR "GOING DARK"

"Going dark" refers to the process of voluntarily delisting a public company's shares from a national securities exchange or inter-dealer quotation system and subsequently deregistering the shares under the 1934 Act, thus suspending or terminating the company's 1934 Act reporting requirements.²⁷⁸ The decision to delist and deregister is one that should be made by the board of directors and will be assessed under the business judgment rule — although delisting and deregistering adversely impacts the market for a company's shares and may place the board of directors at odds with the shareholders of the company who value the market for their shares.

It is more difficult for an issuer to exit the reporting requirements under 1934 Act §§ 12(b), 12(g), or 15(d) than to become subject to those obligations in the first place. In a typical scenario, the issuer may have voluntarily registered its common stock under the 1934 Act on Form 8-A in connection with a NASDAQ listing concurrent with the completion of its initial public offering. In another case, an issuer may never have registered under the 1934 Act, but became subject to the reporting requirements of § 15(d) when its IPO registration statement became effective.²⁷⁹ An issuer may then register its common stock under § 12(b) to be listed on an exchange (such as the NYSE or NASDAQ). The steps to terminate the issuer's reporting obligations must be managed carefully.

Rule 12d2-2 and Form 25 initiate the process to be delisted from a national exchange and to terminate the § 12(b) registration. It can be filed either by the issuer or by the exchange. As set forth in General Instructions 4 and 5 to Form 25 and Rule 12d2-2(d)(1) and (2), delisting occurs 10 days after filing the Form 25, although de-registration occurs automatically 80 days thereafter. The issuer's duty under § 12(b) to continue to file reports under § 13(a) is suspended on the tenth day, the effective date of the delisting. The suspension continues until the 80-day period expires, at which point the § 12(b) reporting obligation is terminated.²⁸⁰

The § 12(b) deregistration is not the end of the story, however, because the § 12(g) registration or the § 15(d) reporting obligation may revive. How the issuer then proceeds ordinarily will depend on whether the issuer is being acquired or delisted to the OTC Bulletin Board or the Pink Sheets. When the issuer is being acquired, it will generally want...