Sidley Austin provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Attorney Advertising: For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000. Down for the Account: Steps to Take When Facing a Change in Accountant AUGUST 5, 2015 Maybe you have recently discovered a problem with the independence of your accountant. Maybe a disagreement has arisen over the scope of an audit, your accountant’s ability to rely on management, an accounting practice or procedure or one of a range of other factors that has complicated your relationship with your accountant. Or maybe you have simply decided to replace your accountant. For whatever reason, you are now facing the resignation or dismissal of your accountant. What steps must you take in order to meet U.S. Securities and Exchange Commission (SEC) filing and disclosure requirements, to satisfy investors and creditors and to get your financial statements back on track? This Sidley Practice Note provides an overview of the factors that an SEC-reporting U.S. company should consider and the actions it should take when confronted with a change in accountant.1 Executive Summary Upon a change in accountant, an SEC-reporting U.S. company will face disclosure requirements and other issues, including those caused if the change results in a delay in filing reports under the Securities Exchange Act of 1934 (Exchange Act). A company must file one or more Current Reports on Form 8-K with the SEC upon any change in accountant. These reports must include information responsive to Items 4.01(a) and 4.01(b) of Form 8-K, which requires disclosure of any resignation or dismissal of a company’s accountant and the appointment of a new accountant, respectively. Where either management or the company’s accountant has determined that the company’s previously filed annual or interim financial statements may no longer be relied upon, further disclosure is required under Item 4.02 of Form 8-K. In addition to these disclosure requirements, a company must make an additional filing if the change in accountant results in the late filing of its Annual Report on Form 10-K or Quarterly Report on Forms 10-Q. In the event of such a missed deadline, the company must file a Notification of Late Filing on Form 12b-25 under the Exchange Act, which is required to disclose and explain the late filing. Such a late filing may also result in limitations on a company’s eligibility to use a Form S-3 registration statement, non-compliance with listing standards of the securities exchange(s) on which a company’s securities are listed and defaults under the company’s debt and other instruments and agreements. Finally, a company must consider the investor- and creditor-relations issues that may arise as a result of a change in accountant. The dismissal or resignation of a company’s accountant may cause confusion or, in some cases, concern in the market, and the company should be prepared to handle questions from its investors and creditors. Required SEC Disclosure Any U.S. reporting company facing a change in accountant—that is, either the principal accountant auditing its financial statements or any independent accountant responsible for auditing a significant subsidiary and upon PAGE 2 whom the principal accountant is expected to rely in its report—must file a Current Report on Form 8-K with the SEC within four business days of the accountant’s resignation, declination or dismissal.2 In particular, the company should focus on the requirements of Items 4.01 and, if applicable, 4.02 of Form 8-K when reporting such a change.3 Item 4.01(a) – Resignation or Dismissal of a Certifying Accountant The resignation or dismissal of an independent accountant (or its declination to stand for re-appointment) is required to be disclosed under Item 4.01(a) of Form 8-K. Item 304(a)(1) of Regulation S-K specifies the information that a company must disclose under Item 4.02(a) of Form 8-K. This information includes: • whether the former accountant resigned, declined to stand for re-appointment or was dismissed, and the date of such event; • whether the accountant’s report for either of the past two years contained an adverse opinion or a disclaimer of opinion or was qualified or modified as to uncertainty, audit scope or accounting principles and, if so, the nature thereof; and • whether the company’s Audit Committee (or Board of Directors, in the absence of an Audit Committee) recommended or approved the decision to make the change of accountant. However, neither Form 8-K nor Regulation S-K requires disclosure of the reasons for the change in accountant, and companies disclosing changes in accountant frequently omit that information from their filings. According to SEC guidance, however, if a principal accountant resigns, declines to stand for re-appointment or is dismissed because its registration with the Public Company Accounting Oversight Board (PCAOB) has been revoked, disclosure of such revocation is required.4 A company must also state whether or not, during the two most recent fiscal years or any subsequent interim period preceding the change, there were any disagreements with the accountant on any unresolved matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure that the accountant would have referenced in its report. If so, further disclosure is required regarding (i) the nature of the disagreement, (ii) whether the company discussed the disagreement with the accountant and (iii) whether the accountant has been authorized by the company to discuss the disagreement with its successor. The types of disagreements contemplated here are those occurring at the decision-making level (i.e., those between personnel of the company responsible for presentation of its financial statements and personnel of the accounting firm responsible for rendering the accountant’s report). The same disclosure is required for “reportable events,” as defined by Item 304(a)(1)(v) of Regulation S-K. A reportable event has occurred if the accountant has advised the company that (i) the company lacks adequate internal controls, (ii) the accountant is unable to rely on management’s representations or unwilling to be associated with the financial statements prepared by management, (iii) the accountant needs to significantly expand the scope of its audit or (iv) information materially impacting the fairness or reliability of a previous audit report or previous financial statements has come to its attention. If the change in accountant was related to a disagreement or a reportable event, an accountant’s oral advice to the company of the disagreement or event is sufficient to require disclosure on Form 8-K—the communication of the disagreement or event need not have been in writing. Finally, the company should also include, as an exhibit to its Form 8-K, a letter from the former accountant (addressed to the SEC) stating whether it agrees with the statements made in the filing and, if not, stating the respects in which it does not agree. Accordingly, companies typically provide a draft of their Form 8-K to the former accountant to obtain its approval prior to the filing. Item 4.01(b) – Appointment of a New Independent Accountant The engagement of a replacement independent accountant is required to be disclosed under Item 401(b) of Form 8-K within four business days of the appointment of the new accountant. A company should disclose such an engagement in the same Form 8-K that includes the disclosure required under Item 4.01(a) if the company has engaged a replacement at the time. If not, the company may file a subsequent Form 8-K to provide the information required by Item 401(b). Where possible, companies typically arrange for the appointment of a new accountant to occur within four business days following the resignation of the previous accountant so that both events may be disclosed on the same Form 8-K. PAGE 3 Item 304(a)(2) of Regulation S-K determines the information concerning the new accountant that a company must disclose under Item 4.02(b) of Form 8-K. This includes the name of the new accountant, the date of that accountant’s engagement and that the engagement has been approved by the company’s Audit Committee or Board of Directors. Further disclosure is required if, during a company’s two most recent fiscal years (or any subsequent interim period prior to the new engagement), it consulted with the new accountant regarding either (i) the application of accounting principles to a specified transaction or the type of audit opinion that might be rendered on the company’s financial statements and the new accountant provided a written report or oral advice on the matter or (ii) any matter that was the subject of a disagreement with the former accountant or any reportable event (as described in the discussion of Item 4.01(a) above). If such a consultation was made, the company must disclose: • the issues on which the new accountant was consulted; • the new accountant’s views on those issues; and • whether the former accountant had also been consulted on those issues. Although not explicitly required, if the company did not consult its new accountant regarding any disagreement or reportable event, it is common practice to include a statement to that effect.5 Further disclosure of non-audit services provided by any new accountant is not required under Item 4.01, but some filing companies include a statement to the effect that the company’s Audit Committee or Board of Directors “considered all relevant factors, including any non-audit services previously provided,” in making the decision to engage the new accountant. A company must request that the new accountant review the Form 8-K before it is filed. A company must also provide the new accountant with the opportunity to furnish a letter addressed to the SEC (and filed as an exhibit to the Form 8-K) containing any new information or clarification of its views, or stating any respects in which it does not agree with the statements made by the company under Item 4.01(a). Typically, however, the disclosure is drafted such that no letter is required. Item 4.02 – Non-Reliance on Financial Statements Often, an accountant’s resignation or dismissal will involve a conclusion (whether by management or by the accountant) that the company’s annual or interim financial statements (including the related audit report or any completed interim review) should no longer be relied upon. In that case, the company should report such nonreliance under Item 4.02 of Form 8-K. It may do so in a single filing with the disclosure required under Item 4.01, if applicable. Regardless of who made the non-reliance determination, a company must disclose: • the date of the determination; • the financial statements, audit reports and interim reviews (and years or periods covered) that should no longer be relied upon; and • the facts underlying the conclusion and the extent to which such facts were known to the company at the time the statements were filed. The filing should also include a statement of whether or not the company’s Audit Committee (or Board of Directors, in the absence of an Audit Committee), or an authorized officer, as applicable, discussed with its accountant the underlying matters disclosed. If the accountant made the non-reliance determination, the company should further include, as an exhibit, a letter from the former accountant (addressed to the SEC) stating whether it agrees with the statements made in the filing and, if not, stating the respects in which it does not agree. As discussed above, companies typically consult with the former accountant in order to avoid any such disagreements. A company should presume that any financial statements subject to a non-reliance determination will likely require restatement (and the related filing of amended annual and quarterly reports), but may consider contacting PAGE 4 the SEC to discuss potential relief from such requirements. In our experience, the SEC staff has granted relief in circumstances where it accepts that the change in accountant has resulted in no material impact on the financial statements that were previously filed by a company and that were audited or reviewed by the company’s prior accountant. Furthermore, once a Form 8-K filing has been made to disclose an Item 4.02 event, the SEC may contact the company to discuss the withdrawn financial statements, reports or interim reviews further. A company should therefore be prepared to discuss the reasons for, and its plan to address, any determination of nonreliance disclosed pursuant to Item 4.02. Late-SEC-Filing Issues The types of audit-related issues that lend themselves to an accountant’s resignation or dismissal are often discovered at the end of the audit or interim review process, shortly before periodic filings (and related financial statements) are due for submission. In such a case, the filing (whether on Form 10-K or Form 10-Q) may be delayed beyond its due date because there is not enough time for both the company to find and engage a new accountant and the new accountant to complete its audit or review of the relevant period(s). The late filing of a Form 10-K or Form 10-Q and related financial statements can affect a reporting company in a number of ways. Among other things, the company must notify the SEC through an NT 10-K or NT 10-Q filed on Form 12b-25 (discussed in greater detail below) that it is unable to file the report in question prior to the SEC’s filing deadline. Late filings may also adversely affect investor and creditor confidence, with a corresponding effect on the trading price of the company’s common stock and other securities, as well as on covenant compliance under the company’s debt instruments, including credit agreements and bond indentures. NT 10-K and NT 10-Q on Form 12b-25 If a reporting company is unable to file a Form 10-K or Form 10-Q with the SEC prior to the SEC’s filing deadline (for reasons other than electronic-filing difficulties), it must file a Form 12b-25 (notated on EDGAR as an NT 10-K or NT 10-Q, as appropriate). The form must be signed by an executive officer or other duly authorized representative of the company and must be electronically filed via EDGAR. A reporting company must file Form 12b-25 within one business day of the due date of any missed filing deadline. Form 12b-25 consists of four parts. Part I identifies the company filing the form, Part II consists of representations to the SEC, Part III contains a narrative disclosure of the reason for the late filing and Part IV provides further basic information about the company. Parts I and IV of Form 12b-25 are unlikely to require any onerous effort on the part of a company when the late filing is due to a change in accountant, except that disclosure of any significant change in results of operations from the corresponding period for the last fiscal year (and an explanation therefor) are required under Part IV, if applicable. In cases in which a missed filing was the result of delayed financial statements, the company must also attach, as an exhibit, a statement from its former accountant succinctly stating the reasons why the accountant cannot timely furnish its opinion or report. A company may opt to make the representations included in Part II by means of a checkbox requesting relief pursuant to Rule 12b-25(b) under the Exchange Act. If checked, the late filing will be deemed to have been filed on the due date, provided all other requirements are met, as discussed more fully below. In checking the box, however, the company represents that: • the reasons causing the inability to file prior to the SEC’s filing deadline could not be eliminated without unreasonable effort or expense; and • the late filing will be filed within: − in the case of Form 10-K, the fifteenth calendar day following the due date; or − in the case of Form 10-Q, the fifth calendar day following the due date. In order to avoid making a misrepresentation to the SEC, any company that does not anticipate being able to file its periodic report within the timeframe described above should not check the box.6 As noted earlier, a company must also provide, under Part III of the form, narrative disclosure of the reason for late filing. Although the form requires that the company provide a “reasonably detailed” explanation (i.e., more than mere boilerplate), such detail may be provided through a reference to any previously filed current report on Form 8-K (disclosing the change in accountant) and a statement that, as a result of its accountant’s resignation or PAGE 5 dismissal, the company will be unable to file the required report by its due date without unreasonable effort or expense. The company may also provide an estimated time period in which it expects to file the report (including whether or not it expects to make the filing within the fifteen or five calendar days, as applicable, prescribed by Rule 12b-25). A Form 12b-25 filing is required regardless of whether a company is seeking to have its late periodic report deemed timely filed. If a company does wish to have the report deemed timely filed, however, it must (i) file a complete Form 12b-25 (including any required exhibit) on time, (ii) check the representation box in Part II of the form and (iii) actually file its missed report within the timeframe prescribed. If it cannot file its report within the grace period provided, the filing will remain a late filing, but the company will have met its related disclosure obligations under the Exchange Act. Other Late-SEC-Filing Issues The late filing of a Form 10-K or Form 10-Q may affect a company’s ability to issue securities, including its common equity, through a registration statement on Form S-3.7 Unless the company is able to file the late report within the grace period provided under Rule 12b-25, as discussed above, or the company receives a waiver from the SEC, the company will be ineligible to file a Form S-3 registration statement—including for the purposes of establishing an automatic shelf—until it has timely filed all of its periodic reports for a full twelve calendar months.8 The late filing of a Form 10-K or Form 10-Q will not affect the ability of a company to issue securities under an existing shelf registration statement on Form S-3, unless, subsequent to the late filing, the company would have been required to update the shelf through a post-effective amendment to comply with the timing requirements of Section 10(a)(3) of the Securities Act of 1933 or to disclose “fundamental changes” under Item 512(a)(1)(i) of Regulation S-K.9 In addition, Form S-3 ineligibility prevents the incorporation by reference of a company’s periodic reports into any Form S-4 registration statement and, significantly, employee benefit plan registration statements on Form S-8 to register shares issuable under equity incentive plans may not be filed until all such late reports are filed. In addition to limitations on Form S-3 eligibility, the failure to file a periodic report prior to the SEC’s filing deadline may create stale information issues. For example, Exchange Act Rule 15c2-11(a) requires that brokers and dealers review a reporting company’s most recent annual and quarterly reports on Forms 10-K and 10-Q, respectively, in order to publish any quotations for such a company’s securities. A late-filing company will also be unable to conduct private placements under Rule 144A and investors will be unable to resell the Company’s restricted securities under Rule 144 until its periodic reports are filed, due to the current public information requirements of those Rules. A public company should also be aware that a late filing may constitute a delinquency under NYSE or NASDAQ listing standards. In the case of the NYSE, a filing is considered delinquent when not filed within the grace period afforded by filing Form 12b-25 or when the company has disclosed non-reliance on previous financial statements under Item 4.02 of Form 8-K and the affected statements are not corrected within 60 days. Late-filing NYSE companies are required to contact the NYSE to discuss the situation and to issue a press release disclosing the late filing. Those companies are also subject to a 60-day cure period that includes ongoing monitoring by the NYSE. Under similar NASDAQ listing standards, a company must submit a plan of compliance within 60 days of any late filing, and may remain listed (at the staff’s discretion) for up to 180 days prior to the issuance of a delisting notification. Debt Defaults Triggered by Late SEC Filings A missed filing may constitute a default under a bond indenture, credit agreement or other instrument or agreement. Although exact language differs from document to document, many such instruments and agreements include an undertaking to deliver copies of any reports filed with the SEC to bondholders or lenders, to a trustee or agent representing bondholders or lenders or to other interested parties. Some debt agreements contain further covenant language explicitly requiring that reports be timely filed with the SEC or delivered to investors by a specified deadline regardless of whether they are filed with the SEC. Factors a company should consider when analyzing its instruments and agreements in light of a late filing include: • whether any reporting covenant includes an explicit timeliness requirement; • the procedures by which a default may be declared, including: PAGE 6 − whether the company must notify any party of a default (for example, lenders or bondholders, or an agent or trustee) of the default, as well as whether any agent or trustee must notify lenders, bondholders or any other parties of such default; − whether the covenant requires delivery of only those reports actually filed with the SEC, or instead requires delivery regardless of whether they are actually filed with the SEC; − whether the failure to file with the SEC constitutes an immediate event of default, or if an event of default occurs only upon notice to the company, passage of time or both; and − if applicable, the proportion of lenders, bondholders or other parties that must participate in order to send the company a notice of default or accelerate the debt; and • the length of time the company has, from receipt of any notice of default (if applicable), to cure such default by making the required filings. Under existing case law, courts have generally not held that a company has defaulted due to a late filing if the relevant covenant required the company to forward SEC filings to lenders or bondholders (or an agent or trustee), but did not expressly require the timely filing of those reports.10 Nonetheless, courts have read such implied timeliness requirements into covenants in cases involving particularly egregious failures to file periodic reports.11 In making this default determination, courts have also found relevant whether a company has worked to provide some measure of current information to investors and creditors in light of a missed filing.12 Investor and Creditor Relations As a filing due date passes with a required report not having appeared on EDGAR, a late-filing company should expect contacts from creditors and investors, particularly those with large stakes in its securities, and from any trustee or agent under a debt agreement. In certain cases, it may be beneficial to reach out to creditors and investors shortly after it becomes known that a late filing will be inevitable in order to procure a waiver of default under any applicable debt agreements (other than public bond indentures). While a late filing may breach a covenant under an indenture or credit agreement, as discussed above, a recent study has found that the likelihood of investors or lenders declaring a default is relatively low.13 Certain factors to consider in assessing the risk of a declaration of default include: • whether it will be possible to file the missed report within the cure period prescribed under any relevant debt instrument; • whether an accountant’s resignation or dismissal may relate to reasons that foreshadow possible defaults under financial covenants; • the financial condition and operating results of the company; • the types of investors holding the issuer’s debt securities or other debt; and • the current market price of any debt securities relative to such securities’ yield. In light of the risk of receiving a declaration of default, and of the importance of providing current information to investors or creditors in potential default situations, maintaining good relationships with investors and lenders, particularly large or otherwise important investors and lenders, can prove critical in such instances. Concluding Thoughts In many cases, a change in accountant is a benign, but unexpected, event in the lifetime of a company. In other cases, the underlying issues are more serious. Regardless of the reason for the change, a reporting company should be aware of the resulting disclosure and other requirements, and the potential investor, market and other impacts, of the change. PAGE 7 In addition to your contacts at the firm, the following Sidley lawyers would be pleased to provide more information. Kevin F. Blatchford Partner firstname.lastname@example.org +1.312.853.2076 Craig E. Chapman Partner email@example.com +1.212.839.5564 Eric S. Haueter Partner firstname.lastname@example.org +1.415.772.1231 Michael Hyatte Partner email@example.com +1.202.736.8012 Thomas J. Kim Partner firstname.lastname@example.org +1.202.736.8615 Paul Michael Jindra Associate email@example.com +1.212.839.5812 RELATED PRACTICE Sidley Securities Practice: Our Securities practice includes lawyers practicing in our offices in the United States, Europe, Asia, Singapore and Australia. We represent issuers, underwriters and other financial intermediaries in structuring and executing securities transactions and disclosure matters in all of the world’s major financial markets. Our lawyers are qualified to practice law in the United States, England and Wales, Hong Kong and Japan, and regularly work on matters involving the securities regulators and the securities exchanges in those markets. To receive Sidley Updates or Newsletters, please subscribe at www.sidley.com/subscribe. AMERICA • ASIA PACIFIC • EUROPE Sidley Austin refers to Sidley Austin LLP and affiliated partnerships as explained at www.sidley.com/disclaimer www.sidley.com 1 The information provided herein applies only to U.S. companies. Foreign issuers may be subject to different or conflicting requirements under federal securities law and SEC rules and regulations. 2 Neither Form 8-K nor Regulation S-K indicates whether the resignation or removal of a certifying accountant is deemed to have occurred on, for example, the date the company becomes aware of the underlying problem, the date the accountant provides written notice to the company or the effective date of the resignation or removal. In cases involving dismissal of an accountant, many companies refer to the date of any relevant Audit Committee or Board of Directors action as the date of the event. In cases involving a resignation, many companies refer to the date of receipt of the resignation as the date of the event, while some companies refer to the date of acceptance of the resignation by the Audit Committee or Board of Directors as the date of the event. However, companies should note that, according to SEC guidance regarding the resignation, retirement or refusal to stand for reelection of a director or officer, the Form 8-K reporting obligation is triggered when the company receives notice of the event, regardless of whether such notice is written or subject to acceptance. The same guidance further states, “Whether communications represent discussion or consideration, on the one hand, or notice of a decision, on the other hand, is a facts and circumstances determination.” See U.S. Securities and Exchange Commission Division of Corporate Finance, Exchange Act Form 8-K, COMPLIANCE AND DISCLOSURE INTERPRETATIONS (May 16, 2013), available here. 3 A foreign private issuer is required to provide information concerning changes in its certifying accountant and “any other information which the registrant deems of material importance to security holders,” to the extent (i) made or required to be made public pursuant to the laws of its home jurisdiction, (ii) filed or required to be filed with a stock exchange on which its securities are traded (if made public by that exchange) or (iii) distributed or PAGE 8 required to be distributed it its security holders, by furnishing a report on Form 6-K, subject to the exceptions noted therein. 4 See U.S. Securities and Exchange Commission Division of Corporate Finance, Exchange Act Form 8-K, COMPLIANCE AND DISCLOSURE INTERPRETATIONS (May 16, 2013), available here. 5 Such a statement may, for example, read, “During the two most recent fiscal years and any subsequent period prior to engaging [the new accountant], the company has not consulted with [the new accountant] regarding either: (i) application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the company’s financial statements, and neither a written report was provided to the company nor oral advice was provided that [the new accountant] concluded was an important factor considered by the company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Regulation S-K, Item 304(a)(1)(iv) and the related instructions) or reportable event (as defined in Regulation S-K, Item 304(a)(1)(v)).” 6 Companies should note that Form 12b-25 includes a legend stating that intentional misstatements on, or omissions of fact from, Form 12b-25 constitute violations of federal securities law. 7 Although late filings do not affect “well-known seasoned issuer,” or WKSI, status, companies that qualify as WKSIs may nonetheless become “ineligible issuers” with respect to Form S-3 due to such late filings. 8 Failure to file a Form 10-K or Form 10-Q may further affect a company’s ability to use a free writing prospectus in connection with a registered offering under Rules 164 and 433 under the Securities Act of 1933. 9 While the Form S-3 requirements in these circumstances may be met, the participants in an offering, depending on the materiality of the issues involved, may determine not to proceed with such an offering until further disclosure is included in the offering document or the required financial information is available. 10 See generally Racepoint Partners, LLC v. JPMorgan Chase Bank, N.A., 902 N.Y.S. 2d 14 (N.Y. 2010); Affiliated Computer Servs. Inc. v. Wilmington Trust Co., 565 F. 3d 924 (5th Cir. 2009); UnitedHealth Group Inc. v. Wilmington Trust Co., 548 F. 3d 1124 (8th Cir. 2008); Finisar Corp. v. U.S. Bank Trust National Association, 2008 WL 3916050 (N.D. Cal. August 25, 2008); Cyberonics, Inc. v. Wells Fargo Bank Nat. Ass’n, 2007 WL 1729977 (S.D. Tex. June 13, 2007). 11 Bank of New York v. BearingPoint, Inc., 13 Misc. 3d 1209(A), 824 N.Y.S. 2d 752, 2006 N.Y. Slip Op. 51739(U) (N.Y. Sup. Ct. 2006) (unpublished table decision); see also Finisar, 2008 WL 3916050 at *5 (distinguishing BearingPoint on the basis that “in BearingPoint, ‘the company disavowed any obligation to file information with the SEC whatsoever.’”). 12 This concern is particularly important in light of the Eighth Circuit’s finding that the New York implied covenant of good faith and fair dealing was not breached by a late filing where the obligor “took all reasonable and necessary steps to provide its noteholders with as much information as possible and as accurately as possible.” UnitedHealth, 548 F. 3d at 1131. See also Affiliated Computer Servs., Inc. v. Wilmington Trust Co., 2008 WL 373162 at *6, Fed. Sec. L. Rep. P 94, 577 (N.D. Tex. Feb. 12, 2008). 13 Yu Gao et al., Enforcement of Bondholders’ Rights and Delay in Financial Reporting 2 (August 2011), available here (“[A]mong the 797 firms that failed to file their financial statements in a timely manner…during the period 2003-2009, 67 firms…received the default notice from bondholders.”).