3.7 Periodic Reporting Requirements

• Library: Corporations and Partnerships in Virginia (Virginia CLE) (2016 Ed.)

3.7 PERIODIC REPORTING REQUIREMENTS

3.701 In General. Registrants become subject to the periodic reporting requirements of section 13 of the Exchange Act ²⁴⁸ by registering securities under section 12 or become subject to the reporting requirements of section 15(d) of the Exchange Act by registering securities under the Securities Act. The mandate of section 15(d) to file reports is automatically suspended for any fiscal year, other than the fiscal year in which the Securities Act registration statement became effective, if the securities of each class to which the Securities Act registration statement relates are held of record at the beginning of the fiscal year by fewer than 300 persons. The purpose of the periodic report is "to keep reasonably current the information and documents required to be included in or filed with an application or registration statement." ²⁴⁹

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From time to time, the SEC adopts significant amendments to its rules under the Exchange Act that are intended to improve disclosure and further to integrate the disclosure systems under both the Securities Act and the Exchange Act. Accordingly, care must be taken to ensure that one is using the current rules when preparing documents under the Exchange Act.

3.702 Annual Report—Form 10-K. Form 10-K is a comprehensive annual report that must be filed within 60 days of each fiscal year end by large accelerated filers, within 75 days of each fiscal year end by accelerated filers, and within 90 days of each fiscal year end by all other filers. A large accelerated filer is defined in Exchange Act Rule 12b-2 ²⁵⁰ as an issuer who (i) had a worldwide market value of the voting and nonvoting common equity held by its nonaffiliates of $700 million or more, as of the last business day of the issuer's most recently completed second fiscal quarter; (ii) has been subject to the requirements of section 13(a) or 15(d) of the Act for a period of at least 12 calendar months; (iii) has filed at least one annual report pursuant to section 13(a) or 15(d) of the Act; and (iv) is not eligible to use the requirements for smaller reporting companies. An accelerated filer is defined in Exchange Act Rule 12b-2 ²⁵¹ as an issuer (i) with an aggregate market value of common equity held by nonaffiliates of the issuer of at least $75,000,000; (ii) who has been subject to the requirements of section 13(a) or 15(d) for at least 12 calendar months; (iii) who has filed at least one annual report pursuant to section 13(a) or 15(d); and (iv) who does not qualify as a smaller reporting company. ²⁵²

The information required in the report closely parallels that required in a registration statement under the Exchange Act. Form 10-K is divided into several parts: Part I (business, risk factors, unresolved SEC staff comments, properties, legal proceedings, mine safety disclosures, and submission of matters to a vote of security holders) and Part II (market for registrant's common equity, related stockholder matters, and issuer purchases of equity securities; selected financial data; management's discussion and analysis of financial condition and results of operation; quantitative and qualitative disclosures about market risk; financial statements and supplementary data; changes in and disagreements with accountants on accounting and financial disclosure; controls and procedures; and other information), which may be

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incorporated in whole or in part by reference to the annual report to shareholders; Part III (directors, executive officers, and corporate governance; executive compensation; security ownership of certain beneficial owners and management and related stockholder matters; certain relationships and related transactions, and director independence; principal accounting fees and services, which may be incorporated by reference from the definitive proxy statement ²⁵³ if filed or to be filed within 120 days after the end of the fiscal year); and Part IV (exhibits and financial statement schedules).

A majority of the members of the board of directors must sign Form 10-K. Directors who sign the report must review its contents carefully and question management with regard to its accuracy and completeness. Failure to review the form before signing could be viewed as a basis for establishing the "scienter" required to report an action against the director under Rule 10b-5. ²⁵⁴ In addition, the principal executive officers and principal financial officers must certify the financial and other information contained in the company's Form 10-K. ²⁵⁵

The Form 10-K report is not to be confused with the customary annual report to shareholders, which is not a prescribed form. Rule 14a-3(b) ²⁵⁶ of the proxy rules requires that a proxy solicitation made on behalf of management relating to an annual meeting at which directors are to be elected "shall be accompanied or preceded by an annual report" to security holders. This annual report is required to include specified disclosures. In addition, the registrant is required to furnish upon request a copy of Form 10-K free of charge to any security holder. Notice of this right must be disclosed prominently in the proxy statement or annual report to shareholders. ²⁵⁷ Some companies have adopted the practice of including the entire Form 10-K report in the annual report to security holders.

3.703 Quarterly Reports—Form 10-Q. After the end of each of the first three quarters of each fiscal year, an issuer that has securities registered pursuant to the Securities Act and is required to file Form 10-K must file a report on Form 10-Q with the SEC. ²⁵⁸ Quarterly reports must be

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filed within 40 days of the end of the first three quarters for large accelerated and accelerated filers and within 45 days for all other filers. ²⁵⁹ This report is designed to ensure the continuous flow of meaningful information to the SEC and the public, including the security holders of the issuer, by providing quarterly financial statements for the fiscal quarter to which the report relates and requiring management, in narrative form, to discuss and analyze the financial condition and results of operations of the issuer or, in the case of a small business issuer that has not had revenues in each of its last two fiscal years, a narrative discussion of its plan of operation. A company must also disclose the conclusions of its principal executive officers and principal financial officers about the effectiveness of the company's disclosure controls and procedures and whether there were significant changes in the company's internal controls or in other factors that could significantly affect these controls after the date of the officers' evaluation. ²⁶⁰ In addition, management must, if applicable, include in the report information about legal proceedings, changes in rights of security holders, defaults in senior securities, matters that have been submitted to a vote of security holders, and any additional information that the issuer desires to report. The information to be provided to the SEC may be incorporated by reference in whole or in part from reports to security holders. ²⁶¹

Interim financial statements included in Form 10-Q must be reviewed by the registrant's independent public accountants. ²⁶² If the registrant states that the interim financial statements have been reviewed by an independent public accountant, a report of the accountant must be filed with the interim statements. ²⁶³

3.704 Current Reports—Form 8-K. A current report filed on a Form 8-K must be filed within four business days after: (i) entry into a material definitive agreement; (ii) termination of a material definitive agreement; (iii) bankruptcy or receivership; (iv) mine safety—reporting of shutdowns and patterns of violations; (v) completion of an acquisition or disposition of a significant amount of assets not in the ordinary course of business; (vi) certain disclosures of material, nonpublic information regarding a company's results of operations or financial condition; (vii) creation of a

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direct financial obligation or an obligation under an off-balance sheet arrangement of a registrant; (viii) triggering events that accelerate or increase a direct financial obligation or an obligation under an off-balance sheet arrangement; (ix) costs associated with exit or disposal activities; (x) material impairments; (xi) notice of delisting or failure to satisfy a continued listing rule or standard, or listing transfer; (xii) unregistered sales of equity securities; (xiii) material modification to rights of security holders; (xiv) change in registrant's certified accountant; (xv) nonreliance on previously issued financial statements or a related audit report or completed interim review; (xvi) changes in control of registrant; (xvii) departure of directors or certain officers, election of directors, appointment of certain officers, and compensatory arrangements of certain officers; (xviii) amendments to the articles of incorporation or bylaws or a change in the fiscal year end; (xix) temporary suspension of trading under registrant's employee benefit plan; (xx) amendments to the registrant's code of ethics or waiver of a provision of the code of ethics; (xxi) change in shell company status; (xxii) submission of matters to a vote of security holders; (xxiii) shareholder director nominations; or (xxi) certain matters relating to asset-backed securities.

Under Regulation FD, ²⁶⁴ a company must publicly disclose any material, nonpublic information that the company discloses to a securities professional or to a security holder if it is reasonably foreseeable that the security holder will trade on the information. As a result of this rule, a company must also file a current report on Form 8-K to disclose the information, unless the company disseminates the information through another method or combination of methods reasonably designed to provide broad, nonexclusionary...