Chapter 17 - § 17.4 • REPORTS TO SHAREHOLDERS

• Jurisdiction: Colorado

§ 17.4 • REPORTS TO SHAREHOLDERS

State law requires that corporations hold annual meetings of shareholders. State law (most of which are based on the Revised Model Business Corporation Act) applies to both publicly held corporations that file reports under the 1934 Act, but also to non-reporting companies with many shareholders and only a few shareholders. The corporation laws generally require that the corporation give notice to its shareholders of the time, place, and subject matters for the annual meetings.

When a company has a class of equity securities registered under the 1934 Act, it has additional requirements that apply whenever the company plans to hold any meeting of its shareholders — whether or not it plans to solicit voting proxies from its shareholders. These rules (the Proxy Rules) are found in Regulations 14A (relating to proxy statements) and 14C (where proxies are not being solicited) and impose significant disclosure requirements. These rules require that:

1) For any meeting of shareholders, the company deliver a proxy statement (or information statement if proxies are not being solicited) meeting the disclosure requirements of the Proxy Rules.
2) For any meeting of shareholders at which directors are being elected, the company deliver an annual report to shareholders meeting the requirements of Rule 14a-3.

The annual report to shareholders gives the company a chance to tell its story, not only to its shareholders, but also to the financial community and investing public at large; and, as a result, the annual report is often somewhat more lengthy and prepared with great concern for literary content and visual form. Companies may use their Form 10-K as their annual reports, or may include the annual report to shareholders as a part of the Form 10-K. Rule 14a-3 requires that any annual report to security holders include:

• Consolidated, audited balance sheets as of the end of each of the two most recent fiscal years and audited statements of income and changes in financial position for each of the three most recent fiscal years prepared in accordance with Regulation S-X (or two years/two years,

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