Chapter 8

 

REPORTING COMPANY REGISTRATION

 

A. REGISTRATION

 

A company having 500 equity shareholders and reaching a level of $10 million in assets must register with the Securities and Exchange Commission as a reporting company.[1] This registration is continuous and requires annual reports, quarterly reports, and interim reports where necessary.[2]

 

SECTION 11A OF THE SECURITIES EXCHANGE ACT OF 1934, 15 U.S.C. 78k-1 (1988)

 

B. PROXY MATERIAL

 

Publicly held reporting companies are subject to compliance with the extensive rules of the Securities and Exchange Commission for the solicitation and voting of proxy material.[3] The companies must provide complete and full disclosure to the shareholders so they can make an informed decision when voting on corporate matters.[4]

A company can be liable for violations of the proxy requirements.[5]

It is important to investors for a proxy statement to contain all material information concerning a company.[6]

An annual report filed with the SEC once a year provides details on the reporting company and its activities.[7] Also, a report filed quarterly provides certain financial information on the company.[8] In addition, any time a material event or a material change occurs, the company must file a report.[9]

 

SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, 15 U.S.C. 78n(a) (1988)

 

SEC RULE 14a-8, 17 C.F.R. 240.14a-8 (1990)

 

SECTION 13(a) OF THE SECURITIES EXCHANGE ACT OF 1934, 15 U.S.C. 78m(a) (1988)

 

TSC INDUS., INC. v. NORTHWAY, INC., 426 U.S. 438 (1976)

 

BASIC v. LEVINSON, 485 U.S. 224 (1988)

 

Section 601 of the Federal Securities Code[10] proposes to provide the Securities and Exchange Commission with authority to require each registrant to file reports and provide such reports to record holders of classes of securities so as to keep information current and investors informed.

 

REGULATION OF TAKEOVERS AND SECURITY HOLDER COMMUNICATIONS, Securities Exchange Act Release No. 34-42055 (October 22, 1999)

 

C. COMPANY INSIDERS

 

Officers, directors, and controlling shareholders owning 10% or more of the voting stock of a reporting company, are insiders and must file regular reports with the Securities and Exchange Commission detailing any changes in their ownership.[11] Such persons are subject to a prohibition against making any profits on the purchase and sale of stock within a 6-month period.[12]

 

SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934, 15 U.S.C. 78p(a) (1988)

 

SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF 1934, 15 U.S.C. 78p(b) (1988)

 

BLAU v. LEHMAN, 368 U.S. 403 (1962)

 

2000 Harry Stansbury

 

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[1] 15 U.S.C. 78l(g)-(h) (1988); SEC Securities Exchange Act Release No. 23,406 (July 8, 1986), reprinted in 36 SEC DOCKET 56 (1986); see Hugh L. Sowards, The Securities Acts Amendments of 1964: New Registration and Reporting Requirements, 19 U. Miami L. Rev. 33, 33-40 (1964).

 

[2] 15 U.S.C. sec. 78m(a) (1988); see William L. Cary, Federalism and Corporate Law: Reflections Upon Delaware, 83 Yale L.J. 663, 692‑703 (1974); Michael J. Connell, Current Developments Under the 1933 and 1934 Acts, in SIXTEENTH ANNUAL INSTITUTE ON SECURITIES REGULATION 77, 77‑80 (Stephen J. Friedman, Charles M. Nathan, Harvey L. Pitt & Roland J. Santoni eds., 1985); Arthur Fleischer, Jr., "Federal Corporate Law": An Assessment, 78 Harv. L. Rev. 1146, 1146‑72 (1965); Carl W. Schneider & Jason M. Shargel, "Now That You Are Publicly Owned...", 36 Bus. Law. 1631, 1632‑34 (1981); see also 56 SEC ANN. REP. 70-72 (1990); Donald C. Langevoort, Information Technology and the Structure of Securities Regulation, 98 Harv. L. Rev. 747, 757-58 & n.41 (1985); Barry D. Bayer & Benjamin H. Cohen, Bringing CD-ROM to Your Laptop, Legal Times, Feb. 7, 1994, at 37; Richard Karp, Hello EDGAR, Bye-Bye Paper, Barron's, June 21, 1993, at 18; Jim Meyer, Surfing the 'Net, 80 A.B.A. J. 100 (Feb. 1994); Richard H. Rowe, Mandatory Electronic SEC Filing Set To Begin in 1987, N.Y. L.J., Dec. 8, 1986, at 33; Gary Slutsker & Janet Novack, Haste Makes Waste, Forbes, Aug. 24, 1987, at 94.

 

[3] 15 U.S.C. 78n(a) (1988); see EDWARD R. ARANOW & HERBERT A. EINHORN, PROXY CONTESTS FOR CORPORATE CONTROL 89‑146 (2d ed. 1968); EDWARD R. ARANOW & HERBERT A. EINHORN, PROXY CONTESTS FOR CORPORATE CONTROL 81‑129 (1957); Myron P. Curzan & Mark L. Pelesh, Revitalizing Corporate Democracy: Control of Investment Managers' Voting on Social Responsibility Proxy Issues, 93 Harv. L. Rev. 670, 672‑77 (1980); Melvin A. Eisenberg, Access to the Corporate Proxy Machinery, 83 Harv. L. Rev. 1489, 1519-26 (1970); Patrick F. Ryan, Rule 14a-8 and Institutional Shareholder Proposals, in 2 SELECTED ARTICLES ON FEDERAL SECURITIES LAW 190, 191-95 (Franklin E. Gill ed., 1991); Sherry R. Sontag, Investors Use Clout In the Corporate Governance Battle, Nat'l L.J., Dec. 2, 1991, at 23.

[4] See EDWARD R. ARANOW & HERBERT A. EINHORN, PROXY CONTESTS FOR CORPORATE CONTROL 146-59 (2d ed. 1968); EDWARD R. ARANOW & HERBERT A. EINHORN, PROXY CONTESTS FOR CORPORATE CONTROL 129-39 (1957); WILLIAM L. CARY, CORPORATIONS 297-361 (4th ed. unabridged 1969); RON CHERNOW, THE HOUSE OF MORGAN 506-11 (1990); JOHN BROOKS, THE GAMES PLAYERS 3-29 (1980); J. PAUL GETTY, HOW TO BE RICH 21-24 (1965); ROBERT LENZNER, THE GREAT GETTY 52-58 (1986); RUSSELL MILLER, THE HOUSE OF GETTY 105-23 (1986); LOUIS NIZER, MY LIFE IN COURT 427-523 (1961); Kenneth J. Bialkin, Proxy Contests, in FIFTEENTH ANNUAL INSTITUTE ON SECURITIES REGULATION 207, 225-26 (Stephen J. Friedman, Charles M. Nathan, Harvey L. Pitt & Roland J. Santoni eds., 1984); Karen Donovan, Proxy Fight Tests SEC's New Rules Easing Speech, Nat. L.J., Dec. 14, 1992, at 17; Richard H. Miller, Proxy Contest Will Re-Enter The Spotlight, N.Y. L.J., June 4, 1990, at 5; Andy Zipser, Wrong Number?, Barron's, Nov. 30, 1992, at 18; see, e.g., Gould v. American-Hawaiian Steamship Co., 535 F.2d 761 (3d Cir. 1976); Playboy Enters., Inc., SEC Securities Exchange Act Release No. 17,059 (Aug. 13, 1980), reprinted in 20 SEC DOCKET 916 (1980).

 

[5] See LOUIS LOSS & JOEL SELIGMAN, FUNDAMENTALS OF SECURITIES REGULATION 1022-25 (3d ed. 1995).

 

[6] See LOUIS LOSS & JOEL SELIGMAN, FUNDAMENTALS OF SECURITIES REGULATION 471-80 (3d ed. 1995).

 

[7] 4 FED. SEC. L. REP. (CCH) 31,101-107.

[8] 4 FED. SEC. L. REP. (CCH) 31,031-37.

[9] 4 FED. SEC. L. REP. (CCH) 31,001-04; see, e.g., Barry S. Augenbraun & Ernest Ten Eyck, Financial Statement Representations in Acquisition Transactions, 47 Bus. Law. 157, 157-59 (1991); Paul M. Bernstein, Disclosure of Merger Negotiations, N.Y. L.J., May 23, 1984, at 1.

 

[10] FEDERAL SECURITIES CODE 601 (1980).

[11]. See MOIRA JOHNSTON, TAKEOVER 247 (1986); LOUIS LOSS, FUNDAMENTALS OF SECURITIES REGULATION 541‑82 (2d ed. 1988); Frederick M. Hopkins, Note, Gollust v. Mendell: Toward an Objective Standard of Standing Under Section 16(b), 48 Bus. Law. 373, 375-76 (1992); Robert T. Lang & Melvin Katz, Liability For "Short Swing" Trading in Corporate Reorganizations, in SELECTED ARTICLES ON FEDERAL SECURITIES LAW 679, 679-706 (Herbert S. Wander & Warren F. Grienenberger eds., 1968); Thomas O. Lind, "Et Seq.", Briefly Speaking (New Orleans B. Ass'n, New Orleans, La.), Summer 1991, at 2; see, e.g., Foremost‑McKesson v. Provident Sec. Co., 423 U.S. 232 (1976); Reliance Electric Co. v. Emerson Electric Co., 404 U.S. 418 (1972); Blau v. Lehman, 368 U.S. 403 (1962); C.R.A. Realty Corp. v. Crotty, 878 F.2d 562 (2d Cir. 1989); Mayer v. Chesapeake Insurance Co., 877 F.2d 1154 (2d Cir. 1989); Texas Int'l Airlines, Inc v. National Airlines, Inc., 714 F.2d 533 (5th Cir. 1983); American Standard, Inc. v. Crane, 510 F.2d 1043 (2d Cir.), cert. denied, 421 U.S. 1000 (1974); Chemical Fund, Inc. v. Xerox Corp., 377 F.2d 107 (2d Cir. 1967).

 

[12]. See JAMES D. COX, ROBERT W. HILLMAN & DONALD C. LANGEVOORT, SECURITIES REGULATION 866-879 (1991).