As part of a public offering, many companies are required to complete annual reports. These annual reports, such as SEC Form 1-K, provide a detailed snapshot of the company’s operation and financial condition throughout a specific fiscal year. Businesses file the reports with the U.S. Securities and Exchange Commission, and they can use the information to meet crucial transparency goals with investors and establish the viability of buying securities during the offering.
What Is SEC Form 1-K?
A SEC Form 1-K is a form that must be filed annually by issuers that have completed a Tier 2 offering under Regulation A. Companies should understand the types of reporting they have to do as part of a public offering, especially if they are obligated to file Form 1-K. Requirements depend on the maximum amount of the offering. Regulation A exempts companies from the traditional requirement to register smaller public offerings. The regulation divides qualified offerings into two tiers. Companies with offerings under Tier 2, which means that they anticipate an offering of more than $20 million but less than $75 million in a 12-month period, must file the 1-K SEC form as part of their SEC company filings.
Key Components of SEC Form 1-K
Companies must complete a SEC Form 1-K filing if they meet certain requirements under Regulation A. Specifically, Tier 2 offerings call for annual reporting using Form 1-K. Additionally, if the initial offering statement did not include an audited financial statement for the last fiscal year, companies using Regulation A exemptions can use the form to file a special financial report.
SEC Form 1-K consists of two parts, including the following details:
- Information about a completed or terminated offering, prior to the 1-K filing deadline
- Description of the business
- Analysis of the company’s financial condition, including discussion of any factors affecting income
- Names and hiring details about executive officers, directors and significant employees
- Ownership of securities by management and significant securityholders
- Fundamental changes to the nature or function of the business, particularly in the last six months of the fiscal year
- Detailed financial statements from the fiscal year
To simplify the process, companies can use exhibits that allow them to reference other documents as part of the filing.
When to File SEC Form 1-K
A 1-K SEC filing must be completed and submitted within 120 days of the conclusion of the company’s fiscal year. Failing to submit required forms with the SEC can lead to financial penalties, extra reviews and other evaluations that can cost a business time and money to rectify. Additionally, investors expect timely reporting as a part of their overall estimation of the risk/reward aspects of each investment. Companies that lag on reporting may decrease investor trust or heighten scrutiny into the viability of their processes. Long term, these concerns can decrease the value of securities or create other negative effects for the business.
Implications of Filing SEC Form 1-K
Filing SEC Form 1-K allows companies to establish compliance with federal law, with other implications. Investors expect businesses to prove that they follow federal regulations and best practices for financial reporting. Although many companies may not be required to file annual reports, especially if they meet the requirements to discontinue reporting, these annual reports can provide several benefits for the organization. Investors often review annual reports as part of the research process, looking for securities that can provide a reliable rate of return over time. Annual reporting helps companies provide transparent details about their financial success that they can show to current and potential investors. Consistent reporting can build trust over time, making it easier for companies to increase the value of the investment.
Simplify the SEC Filing Process
During or after a public offering, some companies must file annual reports to the SEC. Specifically, Form 1-K involves a detailed accounting of the running of the company and its financial experience throughout a single fiscal year. Businesses that fail to keep timely reports can suffer penalties, loss of stock value and other consequences, highlighting the importantanceof accurate reporting. DFIN offers a professional solution to companies looking to meet SEC guidelines without missing a deadline or leaving out important data. Contact us to discover the benefits of our SEC filing software or test out our SEC filing calendar.
