This Checklist summarizes the key steps to take and the principal issues to consider when effecting a reverse stock split, which combines the outstanding stock of a company into a smaller number of shares and increases the share price proportionately. Reverse stock splits are most commonly used by reporting companies, particularly when their stock price has fallen and they want to: Attract more investors. Some investment funds and institutional investors have policies against investing in low-priced stock. The company can try to attract these investors by increasing the stock price through a reverse stock split. Avoid getting delisted by the securities exchange on which their stock is listed. Most securities exchanges have a minimum price requirement for a company to maintain its status as a listed company. If a company is at risk of falling, or has fallen, below the minimum price requirement, it can implement a reverse stock split to increase its stock price and maintain or regain compliance. However, this reason for implementing a reverse stock split has become less relevant because the major securities exchanges have lowered their minimum price requirement to $1.00 (for example, see Continued Listing Requirements Chart: NASDAQ Stock Market and Continued Listing Requirements Chart: New York Stock Exchange). However, reverse stock splits are generally seen as a sign that a company is in trouble, so they should be used only as a last resort. This Checklist assumes that the company effecting the reverse stock split is a reporting company, publicly owned and listed on a national securities exchange, such as the NASDAQ or NYSE. This Checklist generally focuses on the requirements of a Delaware corporation because Delaware is the most common state of incorporation for reporting companies. If the company effecting the reverse stock split is incorporated outside of Delaware, counsel must review the applicable corporate statutes of the relevant state. Non-reporting companies can also effect a reverse stock split, but there are generally fewer requirements. Usually non-reporting companies that are not publicly traded only need to: Take the actions listed in Preliminary Considerations and Corporate Actions. Revise their stock ledgers to reflect the reverse stock split. Exchange old stock certificates held by stockholders with new stock certificates.

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