Annual reporting season is once again upon us, so as you dust off your to do list, here are a few of the many important items for in-house counsel to consider during the inevitable flurry of activity in the coming weeks.
- Annual Report on Form 10-K. One of the most time consuming parts of the annual reporting process for in-house counsel is the preparation of their company’s Form 10-K. While our Top Tips for Preparing Your Quarterly Reports on Form 10-Q also apply to the preparation of your Form 10-K, there are of course additional items to be sure to consider. One such item that oftentimes mistakenly goes unchanged in Form 10-Ks from one year to the next are the risk factors. Not only should risk factors be updated for new factual information applicable to your company, but they should be reviewed carefully to ensure that stale or otherwise now inapplicable information has been updated or removed. In addition, SEC rules require that risk factors be presented in the order of materiality of risk to the company. As a result, remember to consider whether any risk factors should be rearranged from the company’s Form 10-K from the prior year. In addition, don’t forget to include in your Form 10-K any risk factors that were included in your company’s Quarterly Reports on Form 10-Q during the year that remain applicable.
- Section 16 Filings. Due on Valentine’s Day each year (or the next succeeding business day) are updates to Schedule 13G. If your company beneficially owns more than 5% of the outstanding stock of a public company, your company must file a Schedule 13G or 13D with the SEC. The Schedule 13G is for a shareholder that intends to be a passive investor in a public company and has fewer requirements than the Schedule 13D, which is for a shareholder that intends to be an active investor in a public company and influence control over such company. Unlike the Schedule 13D, which must be updated as material changes occur, the Schedule 13G generally must be updated only on an annual basis. Also due on the day the most chocolate is consumed each year (assuming a year-end fiscal year) are Form 5s. These only need to be filed to report director, executive officer and 10% shareholder transactions that were not previously reported due to exemptions or errors. If in error, however, remember to disclose this in your company’s proxy statement. Also, don’t forget that all Section 16 filings (including Form 5s) need to be posted on or linked to your company’s website.
- Proxy Statement. A company’s proxy statement can oftentimes be more tedious than its Annual Report on Form 10-K. In planning ahead, remember that if the company plans to have votes on anything other than electing directors, affirming auditors, approving option plans or say-on-pay or say-on-frequency, you’ll need to consider whether a preliminary proxy statement is required. If so, be sure to build this into your internal timeline. Another lead-time item is director and officer questionnaires. Be sure to send these out well in advance so that the directors and officers have time to review, complete and return these to you and so that you have time to review and follow up with any directors or officers if needed in preparation for the proxy statement. Also, when completing your rules check of the proxy statement, remember that the form of proxy card itself has its own set of rules and that the form of proxy card gets filed as an appendix to the proxy statement and not as a separate document. If you have a third party printing the proxy cards to be mailed, ensure that the version being mailed and the electronic version filed with the proxy statement match exactly. In addition, if your company plans to use “notice and access”, whereby a company may send a notice to its shareholders directing them to the electronic version of the proxy materials instead of sending each shareholder the traditional full proxy package, be sure to build into your timeline the required 40-day notice period.
There is of course an endless list of items to draft, review, prepare and file during the first part of the year, but these are just a few of those on which in-house counsel spend substantial amounts of time.