What Happens When a Debt-Only Filer Becomes a Voluntary Filer?
As we mentioned in our last installment, a debt-only high yield issuer will typically morph into a voluntary filer. To complete the picture for Maple Syrup, here is the lay of the land for voluntary filers. (We are assuming, incidentally, that Maple Syrup has not filed a Form S-8 to register equity awards to employees. Otherwise, each Form 10-K filing would be a Section 10(a)(3) update that would trigger a new effective date and, with it, another year of Section 15(d) reporting.)
Voluntary filers inhabit a somewhat odd position in the SEC reporting universe because they are not required to file Exchange Act reports and are not considered “subject to” Exchange Act reporting. So, your first instinct may be that there ought to be nothing that Maple Syrup has to do under the SEC’s rules (as opposed to the indenture).
But that’s not quite right. In particular, in the SEC Staff’s view, a voluntary filer:
- Must comply with Regulation S-K, i.e., a voluntary filer cannot pick and choose among Reg S-K provisions, complying with some and not others (see C&DI 107.01);
- Should comply with the restrictions of Reg G on the public disclosure of non-GAAP financial measures to avoid “significant issues” regarding anti-fraud compliance (see C&DI 107.01);
- Must check the box on the cover of its Form 10-K to disclose its status as a voluntary filer (see C&DI 116.03); and
- Should not check the box on the cover page of its Form 10-K that it has filed all reports required by Section 15(d) during the prior 12 months, but (as applicable) should add a note to explain that it had filed all Exchange Act reports for the prior 12 months (see C&DI 204.05).
Sarbanes-Oxley Act of 2002
You might be tempted to think that Maple Syrup is SOX-free as a voluntary filer, given that SOX’s definition of “issuer” does not include voluntary filers. But the SEC Staff has a different view. First, Reg S-K codifies many SOX-related requirements that would directly apply.
- SOX 302 and 906 requirements for CEO and CFO certifications codified in Rule 15d-14;
- SOX 404(a) requirements to evaluate the effectiveness of internal control over financial reporting (ICFR) codified in Exchange Act Rule 15d-15 and related requirements to maintain and evaluate disclosure controls and procedures (DC&P); and
- Reg S-K Items 307 and 308 requirements to disclose the results of management’s evaluation of ICFR and DC&P.
That said, several SOX provisions do not apply to voluntary filers, including:
- SOX 404(b)’s requirement of an auditor attestation report on ICFR, thanks to Dodd-Frank’s addition of SOX 404(c), which exempts non-accelerated filers from SOX 404(b) (remember that a voluntary filer is not an accelerated or large accelerated filer, as we discussed last week);
- SOX 304′s clawback of CEO/CFO incentive compensation in the event of a restatement due to misconduct; and
- SOX 402′s prohibition on personal loans to directors and executive officers.
Forms S-3, S-8 and 8-A
A few parting thoughts, while we’re at it. Voluntary filers:
- Generally cannot meet the reporting history requirements of Form S-3 because they are not “subject to” Exchange Act reporting (see C&DI 115.15), although some relief may be available during the year the voluntary filer crosses over to voluntary status (see Lamar Advertising Co. (avail. Nov. 18, 1996));
- Cannot use Form S-8 (see C&DI 126.01), so any equity grants to employees will require an exemption such as Rule 701; and
- Cannot generally use the abbreviated Form 8-A to register their equity securities under the Exchange Act (e.g., to list on the NYSE or Nasdaq) (see C&DI 102.03) and instead must use a full-blown Form 10 to do so.