Every so often a public company finds itself unable to file periodic reports for a protracted time. For example, a company may upgrade auditors and the new firm may advise of the need to re-audit prior years, which can take significant time. Until there is a reliable starting point for financial statements, new filings are in limbo. As time marches on, the older missed filings have less and less signficance to investors but would still entail the same amount of effort and expense to complete as any periodic report.
Over the years the SEC Corp Fin staff has developed ways of simplifying how a delinquent company may “catch up” in its filings. With a few calls to Corp Fin and the Office of the Chief Accountant, the staff would generally permit companies just to file the most recent Form 10-K and any subsequent Forms 10-Q. This approach facilitates getting to investors the most relevant, recent information. There remains some theoretical liability, as discussed below, but sometimes that is bearable for a company.
This week, the SEC staff has amended its Financial Reporting Manual to embody this approach. The manual now states that Corp Fin generally will not issue comments asking a delinquent registrant to file separately all of its delinquent filings if the registrant files a comprehensive annual report on Form 10-K that includes all material information that would have been included in those filings.
The manual also reminds delinquent companies that negative consequences, including legal liability, could arise from not filing all missed reports. The company may still have liability under the Exchange Act for failing to file all required reports, and Corp Fin’s general position does not foreclose the Enforcement staff from seeking enforcement action for the registrant’s filing delinquencies. In addition, until all missed reports have been filed, the company would not be “current” for purposes of Regulation S, Rule 144, or Form S-8 registration statements, and the registrant would not be eligible to use Form S-3 until it establishes a sufficient history of making timely filings.