Director, Officer and Principal Shareholder Questionnaires - a Primer on Contents and Use


In most cases, companies become subject to the periodic reporting requirements under Section 13 of the Exchange Act of 1934 following the effectiveness of the registration statement for their initial public offering of securities under the Securities Act of 1933. The obligation to make public disclosures of material information regarding the company following the offering is generally consistent with the need to provide information for the market of traders for the company's securities. Required reports and filings include the annual report; quarterly reports; current reports; and the annual report to shareholders. These requirements are imposed on unregistered companies by Section 15(d) of the Exchange Act and on registered companies by Section 13 of the Act. Timely compliance with the continuous disclosure requirements is a condition to eligibility for use of the various short-form registration forms under the Securities Act, including Form S-3. Since those forms permit incorporation by reference of information included in the registrant's annual report and quarterly reports, it is essential that such forms be carefully prepared in light of the potential liability for misstatements and omissions.

In-house counsel for companies subject to the periodic reporting requirements will be heavily involved in the drafting process and in collecting and verifying information regarding company insiders. The necessary information to prepare the annual report, as well as the proxy materials for the company's annual meeting of shareholders, should be elicited on a regular basis by means of a questionnaire to be answer by directors (or nominees), officers and principal shareholders. Questionnaires can take a variety of forms and often go into extreme detail. The preferred approach from the perspective of the persons who will use the responses information to draft the applicable documents (i.e., annual report, proxy statement and/or registration statement) is to elicit as much relevant information as possible and not ask the respondents to make their own judgment regarding issues such as whether or not a particular transaction is "material". Respondents will typically be asked to provide:

-- General information, including their correct name and business, home and e-mail addresses, and specific information relating to business activities that can be used to meet the disclosure requirements relating to the directors and key officers of the company;

-- Information regarding involvement in certain legal proceedings;

-- Information regarding transactions between the respondent (and his or her affiliates and family members) and the company;

-- Information specifically relevant to preparation of disclosures in a Securities Act registration statement, which obviously may be removed when the Questionnaire is being used only for preparation of Exchange Act documents;

-- Information regarding executive compensation;

-- Information regarding ownership of securities and compliance with the requirements of Section 16(a) of the Exchange Act (i.e., preparation and filing of Forms 3, 4 and 5);

-- Information relating to the background and financial expertise of audit committee members; and

-- Information that can be used to confirm the "independence" of directors, which differs depending on whether the company’s securities are traded on the NYSE or the Nasdaq.

Since much of the information collected in the questionnaire is based on technical requirements included in SEC regulations and rules the respondents should also be given a document which explains certain "defined terms" such as "affiliate", "arrangement", "associate", "control", "director", "executive officer", "family member", "material", "officer", "related person", "subsidiary" and "transaction".

If time permits consideration should be given to holding short briefing, or question-and-answer, sessions with respondents, either in person or via teleconference with online reference materials, to go over each of the issue areas referred to above to be sure that they understand the purpose of the inquiries and the types of information and transactions which may be relevant to their responses. Each respondent should have an opportunity to review several drafts of the document that is being prepared to be sure that the information they provided is correctly used and/or described in the document.

Questionnaires should be fully reviewed prior to the beginning of each new annual proxy season to be sure that the questions reflect changes in applicable rules and regulations that have been put into effect by the SEC and the major stock exchanges since the last time that the questionnaire was updated. While the 2013 proxy season is winding down it’s not too early to begin thinking about 2014 and reference should be made to the forms and related commentaries in Gutterman, Business Transactions Solutions, Reporting Companies (Sections 106:1 et seq.) to develop a foundation for the 2014 forms library and the contents of the training programs that should be implemented to facilitate the information collection process.


Alan S. Gutterman is the founder and principal of Gutterman Law & Business (http://www.alangutterman.com), a leading provider of timely and practical legal and business information for attorneys, other professionals and executives in the form of books, online content, newsletters, programs, training and consulting services. Mr. Gutterman has three decades of experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises in the areas of general corporate and securities matters, venture capital, mergers and acquisitions, international law and transactions, strategic business alliances, technology transfers and intellectual property, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company. All editions of the Business Counselor Advisor are compiled into Business Counselor Update, which is released monthly and available along with other publications by Mr. Gutterman on the Thomson Reuters Legal Solutions site and through Westlaw Next at Business Counselor. Mr. Gutterman can be re