Under the Securities Act of 1934, an issuer – a company that is publically traded – must make certain reports to the Securities and Exchange Commission (“SEC”) on a periodic basis. An issuer must file a Form 10-K for annual reports, and a Form 10-Q for quarterly reports. A company must file Form 8-K with the SEC whenever a major event occurs. A Form 8-K ensures shareholders and the public are made aware of changes in a timely manner. Events that must be disclosed using a Form 8-K can include resignations of company directors, bankruptcies, acquisitions, and other unscheduled material events. While this form is required, there are several benefits of filing a Form 8-K.
Benefits of Filing a Form 8-K
While the Form 8-K can be costly and time-consuming to prepare, the Form 8-K can come with several critical advantages. One of the most significant benefits of filing a Form 8-K is that it allows companies to promptly disclose information directly to the Securities and Exchange Commission (SEC) and investors, rather than through other means. The information provided in a Form 8-K cannot be changed by the media — and investors need not sift through magazines or financial news websites to obtain the material information.
Other benefits that can come with filing a Form 8-K include:
- Avoiding insider trading allegations
- Providing an essential record for economic researchers
- Increasing transparency with investors
- Helping traders generate ideas
- Allowing shareholders make informed decisions
The only drawback of the Form 8-K is the time that it can take to complete and file. In addition, a company has only four days between the qualifying event and filing with the SEC. The administrative costs associated with preparing these forms can sometimes deter smaller companies from listing on the stock exchange.
What Material Events Need to Be Disclosed in an 8-K — and What Do Investors Need to Know About Them?
Over 30 different qualifying events require filing a Form 8-K. For example, a company must reveal costs associated with exit activities, a change in corporate governance, notice of delisting of a stock, and the unregistered sales of securities. Other common material events that need to be revealed in a Form 8-K include:
Entry into a Material Definitive Agreement
If the registrant signed a material definitive agreement that was not made during the ordinary course of business, the 8-K must reveal the date the agreement was entered into or amended, the identities of the parties, a brief description of any material relationship, and a brief condition. The issuer may – at its discretion – seek confidential treatment of such an agreement.
Termination of a Material Definitive Agreement
If a material definitive agreement is terminated that was not made during the registrant’s ordinary course of business, the 8-K must include the date of termination, the identities of the parties and a brief description of the material relationship, a brief description of the agreement terms and circumstances surrounding the termination, and any material early termination penalties incurred. The issuer may – at its discretion – seek confidential treatment of such an agreement.
Bankruptcy or Receivership
If a receiver has been appointed under the Bankruptcy Code, the name of the proceeding must be disclosed, along with the identity of the receiver, the court, the date jurisdiction was assumed, and various other information.
Acquisition or Disposal of Assets
If significant assets have been acquired or disposed of other than in the ordinary course of business, a brief description of the assets, the date the transaction was completed, and the identity of the person from whom they were acquired must be disclosed.
Events That Increase a Direct Financial Obligation
For triggering events that cause the increase of a direct financial obligation, the date and a brief description of the triggering event must be disclosed, along with the amount of the direct financial obligation and any other material obligations that might arise.
Material Modification to the Rights of Shareholders
A company must disclose any material change to the company’s governing documents that outline the rights of shareholders. Such changes may include things like loan terms that restrict dividend payments or issuing preferred stock.
Amendments to Articles of Incorporation and Bylaws
If a company changes its articles of incorporation, bylaws, or fiscal year dates, a Form 8-K must be filed.
Contact a Skillful New York Business Law Attorney
If you are required to file a Form 8-K, it’s important to have an experienced attorney on your side with extensive knowledge concerning corporate and securities compliance matters. Brinen & Associates is dedicated to guiding clients through the process of completing and filing 8-K forms and helping them remain compliant with SEC regulations. Call (212) 330-8151 to learn how we can assist you and your company.