Blog Public Company Advisory Blog July 05, 2022

Reassessing Exchange Act Filing Status

For public companies with a calendar year-end, now is the time of year for a company to conduct its public float calculation that will determine its Exchange Act reporting status as an accelerated filer, large accelerated filer, non-accelerated filer, smaller reporting company (SRC), and/or emerging growth company (EGC). The following is a very brief summary of the complex rules that govern filer status and qualification as an SRC or EGC.

For calendar year-end companies, a company’s filing status for Exchange Act reporting purposes is determined based in part on the company’s public float as of the end of the second fiscal quarter. As such, public companies with a calendar-year end should perform their public float calculations as of June 30, 2022 to determine what their filing status will be as of December 31, 2022 so that they can plan their SEC filing calendar accordingly. The filing status will determine the due date for the Form 10-K for the fiscal year ended December 31, 2022, as well as the due dates for the three 10-Qs filed in 2023.

Public float, or public float and the company’s total revenues for its most recently completed fiscal year, will also determine whether the company can take advantage of the scaled disclosure accommodations for SRCs. Among the most significant of the scaled disclosure accommodations are an exemption from the requirement to file the Sarbanes-Oxley Act Section 404(b) auditor attestation on the company’s internal control over financial reporting with the company’s Form 10-K (assuming the company also meets the definition of non-accelerated filer), an exemption from the requirement to include Compensation Discussion and Analysis in the company’s definitive proxy statement, and the ability to file audited financial statements for two years rather than three years with the Form 10-K. SRCs can, in general, take advantage of some, all or none of the available scaled disclosure accommodations, and can do so as early as the Form 10-Q for the second fiscal quarter of the current year. An SRC that does so must check the SRC box on the cover page of the relevant Form 10-Q or Form 10-K report for the current year, and all companies that qualify as an SRC are required to check the SRC box on the cover page of the three Form 10-Q reports and the Form 10-K report filed for the following fiscal year.

Although most companies that qualify as an SRC will be non-accelerated filers, those that have a public float of $75 million or more to less than $250 million as of June 30, 2022 and had annual revenues of $100 million or more for the fiscal year ended December 31, 2021 will be accelerated filers even though they are SRCs.  Among the important results of being an SRC and an accelerated filer are (1) the exemption from filing the SOX 404(b) auditor attestation is not available and (2) the SRC must file its Form 10-K and Form 10-Q reports not later than the due date for accelerated filers.

Public float does not affect eligibility for EGC status, but can indirectly affect termination of EGC status. If an EGC becomes a large accelerated filer, its EGC status will terminate as of the last day of the current fiscal year.  EGCs are also eligible for scaled disclosure accommodations, although these differ in some respects from those available for SRCs.  Unlike SRCs that lose SRC status, EGCs that lose EGC status must in many cases comply with the disclosure requirements that apply to operating companies in the next applicable filing.

The public float calculation is determined based on the aggregate worldwide market value of the voting and non-voting common equity held by the company’s non-affiliates using the closing stock price as of the last business day of the company’s most recently completed second fiscal quarter, or June 30, 2022 for calendar year-end companies. Thus, a calendar year-end company will need to determine as of June 30, 2022, its number of shares outstanding, its closing stock price, and the number of shares held by non-affiliates, which sometimes requires a complex analysis of affiliate status, in order to determine its public float.

 

 

 

 

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