Our Practice
Nasdaq Deficiency Notices and Continued Listing Compliance
A Nasdaq-listed company should promptly determine the rule involved, available cure period, disclosure requirements, compliance alternatives, and consequences of failing to regain compliance.
Nasdaq continued-listing standards may involve share price, stockholders' equity, market value, public float, shareholders, governance, audit committees, annual meetings, shareholder approval, and timely SEC reporting. Capital Markets Law Group helps companies read the notice accurately, respond within the deadline, and build the compliance plan the cure period allows.
What Deficiencies Commonly Arise?
A company may receive a notice concerning:
- Minimum bid price
- Stockholders' equity
- Market value of listed securities
- Market value of publicly held shares
- Publicly held shares
- Number of shareholders
- Independent directors
- Audit committee composition
- Late SEC reports
- Annual meeting requirements
- Shareholder approval
- Compensation committee requirements
- Other governance or listing matters
What Happens After a Bid-Price Deficiency?
The company may receive a compliance period during which its closing bid price must reach and maintain the required level for the period specified by Nasdaq.
Potential responses may include:
- Monitoring market price
- Reviewing investor disclosure and communications
- Completing a reverse stock split
- Seeking an available additional compliance period
- Demonstrating compliance with other required standards
- Preparing for a hearing if delisting is threatened
A reverse split must be planned early enough to complete required corporate approvals, state filings, Nasdaq notice, transfer-agent coordination, and market implementation.
Must the Deficiency Be Disclosed?
The company may be required to disclose the notice through Form 8-K and comply with Nasdaq announcement requirements.
The disclosure should accurately describe:
- The deficiency
- The applicable compliance period
- The company's proposed response
- The uncertainty of regaining compliance
What Are the Nasdaq Market Tiers?
Nasdaq operates the Nasdaq Global Select Market, the Nasdaq Global Market, and the Nasdaq Capital Market. Continued-listing thresholds scale with the tiers: the Global Select Market carries the most demanding financial and liquidity requirements, the Global Market is more stringent than the Capital Market, and governance requirements are generally the same across all three. A company that listed on one tier should follow its own tier's continued-listing rules rather than general market commentary.
Can the Company Appeal a Delisting Decision?
Nasdaq provides a hearings process for specified staff determinations. A hearing request may stay suspension and delisting in certain circumstances, but the applicable rule and deadline must be reviewed immediately.
A hearing does not guarantee continued listing. The company generally must present a credible and documented compliance plan.
How Does Capital Markets Law Group Help?
Our services may include:
- Reviewing the deficiency notice
- Identifying cure periods and deadlines
- Preparing Form 8-K and public disclosure
- Developing a compliance plan
- Planning a reverse split or financing
- Addressing board and committee deficiencies
- Preparing Nasdaq submissions
- Coordinating with auditors, transfer agents, and advisers
- Preparing hearing materials
- Advising on OTC transition planning if necessary
Keep Reading: Nasdaq and NYSE American Uplistings, Nasdaq Listing Applications and Uplisting Counsel, SEC Securities Offerings, Going Public and Form S-1 Registration Statements.
Frequently Asked Questions
Does a Deficiency Notice Mean Immediate Delisting?
Not always. Many deficiencies provide a compliance period, although the process depends on the particular rule.
Does a Reverse Split Guarantee Bid-Price Compliance?
No. The post-split price must reach and maintain the required level, and the company must satisfy all other requirements.
Can Nasdaq Require More Than the Published Minimum?
Nasdaq retains qualitative and public-interest authority under its rules.
What Happens If the Company Cannot Regain Compliance?
It may face suspension and delisting, subject to available hearings or appeals. OTC quotation and shareholder communication issues should also be considered.
Should the Company Announce a Reverse Split Immediately?
The timing and wording should be coordinated with board action, shareholder approval, Nasdaq requirements, transfer-agent readiness, and market considerations.
Which Notice Usually Arrives First?
A bid-price deficiency commonly issues when a security's closing bid falls below the applicable threshold, and other financial deficiencies typically surface in connection with periodic review or an annual meeting. The notice states the rule and the response deadline, and that deadline controls the calendar more than any general timeline. Companies should confirm the specific rule cited in their notice rather than relying on a summary.
Can the Company Fix Several Deficiencies at Once?
Often. A financing can restore stockholders' equity, market value, and shareholder-distribution measures together, while a reverse split addresses price but not capitalization. The plan should sequence the responses so that each cure supports the others, and the Form 8-K disclosure should describe the company's approach as a whole.
Get Started
Talk to Capital Markets Law Group About the Deficiency Notice
Capital Markets Law Group assists Nasdaq-listed companies with deficiency notices, compliance plans, reverse stock splits, governance issues, hearings, disclosure, and exchange communications. Contact the firm promptly after the notice arrives so the response is built on the rule the notice actually cites.