Form 8-K

Private companies going public should be familiar with the requirements of Form 8-K.  Once a company completes its going public transaction and its Form S-1 is effective,  it is required to comply with the SEC’s periodic reporting requirements.

These requirements include the obligation to report certain material events on Form 8-K within four days of the triggering event. Current Reports on Form 8-K provide investors with current information to enable them to make informed investment decisions.

The information required by Form 8-K is considered to be “material” information. This means that there is a substantial likelihood that a reasonable investor would consider the information important in making an investment decision.

What Events Trigger Current Reports on Form 8-K?

The events below are triggers for the issuer’s obligation to file Current Reports on Form 8-K:

• Item 1.01 requires SEC disclosure of certain material agreements not made in the ordinary course of business, or material amendments to those agreements.
• Item 1.02 requires that reporting issuers disclose the termination of a material agreement on Form 8-K. If an agreement simply expires according to its previously disclosed terms, that termination would not need to be reported on Form 8-K.
• Item 1.03 requires an SEC reporting issuer to disclose on Form 8-K if it becomes the subject of a bankruptcy or receivership court filing.
• Item 2.01 requires disclosure on Form 8-K if the issuer acquires or disposes of a significant amount of assets, and requires a description of the terms of the transaction.
• Item 2.02 requires SEC reporting companies which announce their quarterly and annual results simultaneously  in a press release to file disclosures on Form 8-K.
• Item 2.03 requires that SEC reporting companies report the basic terms of their material financial obligations including any long-term debt, capital or operating lease, and short-term debt outside the ordinary course of business. Item 2.03 also requires disclosure of material financial obligations, whether direct or contingent, that arise out of off-balance sheet arrangements.
• Item 2.04 requires that an SEC reporting issuer disclose on Form 8-K any defaults on loans or other events that trigger the acceleration or increase of a financial obligation if the consequences of the event are material to the issuer. For example, if an issuer defaults on a loan, its creditors typically have the right to demand immediate payment of the entire amount owed.
• Item 2.05 requires disclosure of restructuring plans that will cause the issuer to incur material charges, such as an issuer’s decision to close some of its stores or to lay off workers. The issuer also must disclose its estimates of the costs involved, once it is able to determine them.
• Item 2.06 requires disclosure of certain material impairments in a Current Report on Form 8-K. If the issuer determines the impairment when routinely preparing its financial statements for its periodic report, the issuer may make the disclosure in the periodic report rather than in an 8-K. Material impairments may occur when an issuer significantly lowers its estimate of the value of certain assets, such as the value of its brand or of a business it has acquired. The impairment impacts the financial statements as a decrease in assets on the balance sheet and as an expense on the income statement.
• Item 3.01 requires an SEC reporting company to file a Current Report on Form 8-K if  a stock exchange notifies the issuer that it no longer satisfies the requirements for continued listing on the exchange. If the issuer has a grace period in which to become compliant, it should disclose the steps it intends to take, if any, to avoid delisting.
• Item 3.02 requires the filing of a Current Report on Form 8-K to report private sales of securities exceeding one percent (“1%”) of the issuer’s outstanding shares of any class or 5 percent (“5%”) for issuers who qualify as smaller reporting companies.  Public offerings registered with the SEC need not be disclosed under Item 3.02.
• Item 3.03 requires that the issuer report material changes to instruments that define the rights of shareholders, such as an issuer’s articles of incorporation or material limitations on the rights of security holders that result from the issuance or modification of another class of securities.
• Item 4.01 requires SEC reporting issuers to disclose if it terminates auditors, if the auditor resigns or declines to stand for re-appointment, and if the issuer hires a new auditor.
• Item 4.02 requires an SEC reporting issuer to provide disclosure on a Current Report on Form 8-K if it believes that its previously issued financial statements should not be relied upon because of an error in the statements. 8-K disclosure is also required if the auditor believes that its previously issued audit reports or interim reviews on financial statements should not be relied upon.
• Item 5.01 requires that the issuer disclose any changes of shareholder voting control including who acquired control and the percentage of voting securities that they beneficially own, as well as any arrangements between the old and new control groups regarding the election of directors or other matters.
• Item 5.02 requires the issuer to disclose the resignation of a board member and if a board member refuses to stand for re-election because of a disagreement with the issuer relating to the issuer’s operations, policies or practices. If a director is removed for cause, the issuer must briefly describe the circumstances of the removal. If the director provides a letter regarding his or her resignation, refusal or removal, the issuer should file the resignation letter as an exhibit to the 8-K. If an executive officer retires, resigns or is terminated, the issuer must also report the event on Form 8-K.  The issuer must disclose the appointment of a new director or executive officer as well as their compensation arrangements, if any.
• Item 5.03 requires an SEC reporting issuer disclose in a Current Report on Form 8-K amendments to its articles of incorporation or bylaws, or changes to its fiscal year, unless the issuer previously disclosed the foregoing in a proxy or information statement.
• Item 5.05 requires SEC reporting issuers to report changes to their code of ethics applicable to their chief executive officer, chief financial officer, chief accounting officer or controller, or others persons performing similar functions.
• Item 5.07 requires that SEC reporting issuers disclose the results of shareholder voting in director elections and on all other matters submitted to a vote of shareholders.
• Item 7.01 requires SEC reporting issuers to comply with Regulation FD (“fair disclosure”) which generally requires that issuers provide material information to the public at the same time as they provide it to others.
• Item 8.01 requires that SEC reporting issuers disclose other events that it believes to be material but are not specifically required by the item numbers specified in the Current Report on Form 8-K.
• Item 9.01 requires an SEC reporting issuer file certain financial statements and list any exhibits that it has filed as part of the Current Report on Form 8-K.

Issuers should be aware that compliance with SEC reporting requirements is not limited to keeping current with Forms 10-K and 10-Q, and that they are obligated to report the specific item numbers set forth above as well as any “material” information within four days of the event on a Current Report on Form 8-K. Submitting Forms 8-K timely are an important part of a filer’s responsibility to the regulatory agency as well.