SEC Form 25

The filing requirements for SEC Form 25 are listed below: 

• The company must file a yearly report by submitting Form 10-K. 
• Notice of intent to delist, including delisting date and other details to the SEC. 
• The company should file quarterly reports through Form 10-Q, including other current reports on Form 8-K, which are used to inform shareholders about any significant event. 
• Companies without an IPO are still subject to the Securities and Exchange Act if they have more than $10 million in assets with over 2000 investors. 
• Proper documents and accurate information are attached while electronically filing Form 25 through the EDGAR database.

The steps to follow in order to file SEC Form 25 are -

• The SEC Form 25 must be filed electronically using the EDGAR database, which stands for Electronic Data Gathering, Analysis, and Retrieval System. 
• EDGAR is the primary system for US corporations under the Investment Company Act of 1940, the Securities Exchange Act of 1934, the Securities Act of 1933, and the Trust Indenture Act of 1939 to process electronic tax filings and other documentation. 
• The delisting determination should be attached to Form 25, which will serve as a required notice to Exchange Act Rule 19d-1 and is observed as compliance with the provisions of Rule 19d-1. 
• The class of securities removal from the stock exchange listing shall come into effect 10 days after the filing of Form 25. 
• The withdrawal of the class of securities registration shall come into effect in 90 days. 
• Under Section 12 of the Exchange Act, the company’s class of securities shall no longer be considered listed upon the effective date of delisting, even though registration withdrawal is yet to happen. 
• An issuer must file any report under Section 13(a) of the Exchange Act for any further information. 
• Issuers should determine whether they have any additional registration and reporting protocols under Section 12(g) and Section 15(d). 
• In case the SEC commences a proceeding prior to the securities registration withdrawal becoming effective, such security shall remain registered under Section 12(b) of the Exchange Act until the proceeding’s final decision. 
• In case of successor security to trading under the temporary exemption, Form 25 should be filed with the SEC to ensure that delisting does not become effective before the successor security is crossed off its exempt status.

SEC Form 25 is the document used by publicly traded companies to file for the delisting of their securities from the respective stock exchanges. This provision comes under the Securities and Exchange Act of 1934. In a nutshell, any company trading on the stock exchange decides to turn private files to the SEC Form 25. The rule dictates that the company must issue a press release and post a clear notice on its website to inform and make the announcement of its intention to delist from the stock market 10 days before the delisting becomes effective. 

A company can decide to either go private or go dark. The former means to liquidate shares and delist them from the exchange, and the latter refers to moving from a major stock exchange to Pink Sheets. There can be a series of different reasons for a company to indulge in delisting, such as failing to meet listing standards, voluntary delisting as a business move, mergers, bankruptcy, and implications or options for investors. Businesses incur huge compliance costs for SEC disclosure every year. This is another reason for small companies planning to delist and deregister with the SEC. 

The whole process, including the deregistration of securities, takes up to three months but can be processed early if all the files and documents are in proper order. It is an important step for any company and hence takes a lot of paperwork and processing time given that it has its filing requirements and step-by-step process. However, investors must remain actively aware of the delisting and its impact, such as the loss of liquidity. Additionally, they should be mindful of the potential for a reverse stock split and the limited availability of information.

Here are two examples to understand the concept better: 

Example #1

Suppose Simon took over the family hotel business and brought fresh ideas and a new vision for it. Until now, his grandfather and father have managed the business, which is publicly listed on the NYSE. However, Simon believes that taking the company private would be a smart business move. 

After much discussion in the family, Simon finally decides to go for it. Now, as per the Securities and Exchange Act of 1934 with the SEC, he will have to file Form 25 with a press release and post notice on the company’s website. He will use EDGAR to file electronically and will attach all the necessary documents. 

The delisting becomes effective 10 days after the filing date of Form 25, while the deregistration of the class of securities will take up to 90 days. This is a very straightforward example of SEC Form 25, but in the real world, there are many considerations to be made regarding the SEC and proceedings.

Example #2

PartnerRE Ltd, in July 2024, announced its plan to voluntarily delist its preferred shares of up to 4.875% from the New York Stock Exchange and also to deregister the shares under the US Securities Exchange Act of 1934. The company used a news release to announce that they have informed the NYSE of its intention to delist its preferred shares. 

The company was expected to file Form 25 with the US SEC in July to begin the delisting and deregistration process under Section 12(b) of the Exchange Act. The company's last trading day is guessed to be around July 19. According to the company, the decision was made after extensive discussions and consideration of financial and administrative requirements.

Its importance is listed below: 

• Allow companies to delist themselves from the stock exchange. 
• For any company that is unable to satisfy SEC standards and compliance, withdrawing from the stock market is a good option. 
• Often, company management considers going private a smart business move. Without Form 25, that would never be possible. 
• It forms compliance and obligation, making sure that companies only go private by informing and properly notifying investors and the general public about it. 
• SEC uses Form 25 to ensure the right company is listed and delisted from the stock exchange after proper processing.