On August 23, 2004, the SEC's expanded Form 8-K reporting requirements go into effect. The new requirements nearly double the number of significant events reportable on Form 8-K and include new filing requirements for, among other things, creation of a direct financial obligation or an off-balance sheet arrangement. In addition, Form 8-K filing deadlines, currently ranging between 15 calendar days and five business days, will be shortened to four business days.[1] Some of the new filing requirements will impose an increased compliance burden on public companies. In particular, it will be necessary for companies to have in place procedures to assure rapid attention to the Form 8-K filing requirements in certain instances such as the entry into, or material amendment to, a material contract. Public companies should be in the process of reevaluating and modifying their disclosure controls and procedures to address these new Form 8-K requirements and to avoid delays in timely Form 8-K reporting after August 22nd.
Disclosure controls and procedures are a company's system of controls for collecting, processing, summarizing and reporting all required material information for the company's SEC filings. A company's disclosure controls and procedures encompass its procedures for reporting required and optional events on Form 8-K. At the conclusion of each financial quarter, a company's CEO and CFO must certify in the company's quarterly or annual report that an evaluation of the effectiveness of the company's disclosure controls and procedures has been conducted and the results of the evaluation are presented in the periodic report being filed.
If during a quarter ending after August 22nd, a company is late with a required Form 8-K filing or fails to make a Form 8-K filing at all for one of the new disclosure items, there can be a range of consequences including that the efficacy of the company's disclosure controls and procedures may be questioned. Management may have to explain how the company's disclosure controls and procedures can be deemed effective in light of the Form 8-K disclosure breakdown. To avoid this scenario, we remind our public company clients that they should review their disclosure controls and procedures now to see what changes must be made before August 23rd to address the upcoming changes to Form 8-K reporting.
[1] For a detailed analysis of the changes to Form 8-K, you can go to our client alert summarizing the new requirements: Morrison & Foerster — Legal Update — SEC Accelerates and Expands Reporting of Significant Events on Form 8-K.