Decreased legal and accounting costs and time focused by management on compliance issues rather than managing the operations of the bank are just a few of the multitude of benefits arguing for SEC registered banks and bank holding companies to deregister or “go private.”  To date, the process for going private has often been expensive, time consuming, challenging, and at times simply unachievable, as banks often had to structure complex transactions (e.g., conducting a tender offer or a reclassification of common shares into preferred shares) to decrease the number of shareholders of record to an amount below 300. 

However, under the Jumpstart Our Business Startups Act (or JOBS Act), which went into effect on April 5, 2012, the process for many banks to go private has been made easier and less expensive.  Specifically, the JOBS Act permits a bank or bank holding company to terminate its SEC registration if it has fewer than 1,200 shareholders of record (rather than the previous threshold of 300).

As a result of the new legislation, many banks will now be able to go private by simply filing a Form 15 with the SEC (some may also need to seek a no action letter from the SEC).  Others that remain above the 1,200 record shareholders threshold will be able to go private by conducting a reverse stock split in addition to filing the Form 15.  The JOBS Act will provide many banks with an incentive to review their long-term strategic plans, as well short-term costs savings, to determine whether it is in the best interests of the bank and its shareholders to go private.

For further information on the JOBS Act, advantages and disadvantages of going private, and the process for going private, please contact the members of the Nelson Mullins team listed at the bottom of this alert.  For additional information on the JOBS Act’s impact on the ability of banks and other companies to raise capital, please see our alert here.