February 20, 2008

What to Do If You Can’t Timely File Your 10-Q?

Brink Dickerson of Troutman Sanders recently delved into the question of “what are the SEC Staff’s most recent views with respect to what a company should do if it is unable to file a Form 10-Q – even after the extension provided by Form 12b-25 – because the company’s auditors have not completed their Reg. S-X 10-01(d) review?” This can occur due to a number of reasons, ranging from an untimely auditor resignation to a complex accounting issue that the auditors simply have not resolved.

Brink states that the Staff generally believes that it is best to disclose as much accurate information as quickly as possible, either through filing a Form 10-Q that has not been reviewed or a Form 8-K. When a Form 8-K is filed, practices range from disclosing just recent high-level operating results and limited other financial data in the body of the filing (or in a press release that is attached as an exhibit) to filing essentially complete financial statements (along with the MD&A) as an Exhibit 99. When the filing is ready to be made, the Staff may either seek the filing an unreviewed Form 10-Q – because of the accompanying certifications and the fact that investors naturally would look for a document labeled as a Form 10-Q for quarterly results – or the filing of a Form 8-K; here is where you may want to contact the Staff that handles your industry to see which approach they prefer.

In all events, Brink says that:
1. the lack of the review needs to be clearly highlighted through an introductory note (see the March 2001 Current Issues Outline Update)
2. the reasons for the lack of the review should be disclosed completely
3. the companies expectations with respect to filing a definitive Form 10-Q (or Form 10-Q/A) should be discussed
4. to the extent that any numbers could be expected to change as a result of the review, those numbers and, if possible, the potential outcomes should be discussed
5. columns containing financial information should be labeled “unreviewed”

Most critically, he points out that the importance of accuracy far outweighs the benefits of filing quickly, and companies should not file either a Form 10-Q or a Form 8-K if it does not have an appropriate level of confidence in the numbers that are disclosed. Unfortunately, a Form 10-Q that has not been officially reviewed by the auditors still will be substantially deficient for ’34 Act purposes, so filing one will not solve Form S-3 eligibility issues. It will, however, help with investor and stock exchange relations – and may solve some covenant violation concerns caused by the absence of any filing. FYI, the review requirements for Form 10-Qs originate from this adopting release relating to audit committee disclosure from 1999.

SEC Certification of Delaware Law Issues

Last summer, the Delaware legislature amended the Delaware Constitution to permit the SEC to certify questions of law directly to the Delaware Supreme Court (one of the many things I have been meaning to blog about, but keeps getting bumped). In this podcast, J.W. Verret of Skadden, Arps and a recent law clerk for Vice Chancellor John Noble analyzes a host of recent Delaware law developments and issues, including:

– What did the Delaware legislature do last year?
– Has the SEC used this new ability yet?
– What are the types of issues that the SEC may ask for certification?
– Why are bylaws so important?
– How does Rule 14a-8 relate to Delaware corporate law?
– Does it matter whether a new proposed bylaw put forward by shareholders goes on the company’s ballot?
– How clear is Delaware law on what a new bylaw can say?
– What is the likelihood the Delaware Supreme Court will accept a question certified from the SEC?
– What are the consequences of the SEC giving a no-action letter on a bylaw without pre-certifying?

MAC Clauses: All the Rage

Join tomorrow for the webcast – “MAC Clauses: All the Rage” – to hear from the experts on how “material adverse change” provisions are under more scrutiny than ever, causing some deal practices to change. These changing practices not only impact how lawyers negotiate deals, but they entail wide-ranging ramifications for dealmakers. The panel includes:

– Professor Steven Davidoff of Wayne State Law School and the “M&A Law Prof” Blog
– John Grossbauer, Potter Anderson & Corroon
– Travis Laster, Abrams & Laster
– Patrick Lord, Dechert
– Derek Winokur, Dechert

The Latest Developments: Your Upcoming Proxy Disclosures —What You Need to Do Now!

We have posted the transcript from Part II of the webconference: “The Latest Developments: Your Upcoming Proxy Disclosures —What You Need to Do Now!”

– Broc Romanek