Valentine’s Day Fun Fact No. 1: The first recorded association of romance and Valentine’s Day dates from the 14th Century (in Chaucer’s Parlement of Foules).

Fun Fact No. 2: Under the SEC’s Rules for beneficial ownership reporting, in addition to buying a card, booking a restaurant, etc., you should be thinking about those Schedule 13G filings, which are due 45 days after the end of the calendar year, or February 14.
What’s a Schedule 13G?

Exchange Act Section 13(d) requires that any person who is the direct or indirect beneficial owner of more than 5% of any Section 12 registered class of equity securities must file certain information with the SEC. That filing is done on a Schedule 13D or Schedule 13G, see Exchange Act Rule 13d-1.

A 5% stockholder must file a Schedule 13D unless the stockholder is:

• An institutional investor–a stockholder who (a) acquired the shares in the ordinary course of its business and not with the purpose or with the effect of changing or influencing the control of the issuer and (b) fits within one of the categories in Rule 13d-1(b) (e.g., broker-dealer, bank, insurance company or investment company);
• A passive investor–a stockholder who beneficially owns less than 20% of the class of securities and has not acquired the shares with the intention of changing or influencing the control of the issuer; or
• A grandfathered investor–a stockholder who acquired the shares before the issuer went public and, following the IPO, has not acquired more than 2% of the outstanding shares in any 12-month period.

Who has to file by February 14?

A stockholder who has filed an initial Schedule 13G is required to amend its filing annually to report any change in its previously filed Schedule 13G. The annual amendment is due within 45 calendar days after calendar year-end, or February 14. The annual amendment to Schedule 13G should report the stockholder’s holdings as of the prior December 31.

A stockholder who held more than 5% of the shares in a pre-IPO company is eligible to file a Schedule 13G in lieu of filing a Schedule 13D. So if a company went public in 2015, then a pre-IPO 5% stockholder’s initial Schedule 13G would be due no later than February 14, 2016.

A stockholder who previously filed a Schedule 13G but whose holdings have fallen to 5% or less during the calendar year is not exempt from filing an amendment by Valentine’s Day: Section 13(d) reporting obligations persist until an amendment is filed reporting beneficial ownership of 5% or less. However, once such an amendment is filed, the stockholder has no further Section 13(d) filing obligations until its holdings increase above 5% again.
What if nothing has changed?

No amendment is required if there have been no changes in the information filed on the prior Schedule 13G. Likewise, no amendment is required if the only change in information is the percentage of the securities owned by the stockholder and that change resulted solely from a change in the number of shares outstanding.
So who is the beneficial owner of what?

The most complicated part of filing a Schedule 13G is determining which shares and entities to include in the filing. In general, each beneficial owner of more than 5% of a registered equity security must file a Schedule 13G. This also includes any Section 12 securities that the stockholder has the right to acquire within 60 days, which could include warrants or options. But beneficial ownership is not as straightforward as it sounds.

A person or entity is the beneficial owner of shares for purposes of Section 13(d) if it has or shares the power to vote or dispose of the shares, or the power to direct the voting or disposition of the shares. The majority stockholder of a corporation would be deemed the beneficial owner of shares held by the corporation, as would the general partner of a partnership, the managing member of a limited liability company or the trustee of a trust. However, an economic interest in the shares of an issuer registered under the Exchange Act, without more, is not deemed to be sufficient to establish beneficial ownership.

In a corporate structure with multiple levels of entities, the same securities may be beneficially owned by multiple entities. For example, in a case where an individual is the sole stockholder of a company with a subsidiary that is the record holder of shares, under Section 13(d), each of the subsidiary, the company and the sole stockholder would be the beneficial owner of the shares held by the subsidiary.

Where two or more persons agree to act together for the purpose of acquiring, holding, voting or disposing of shares of an issuer, those persons will be deemed a “group” under Section 13(d), and the group will be deemed the beneficial owner of all securities of the issuer held by the members of the group. Note that the “act” or “agreement to act” required to establish a Section 13(d) group must be an act taken in connection with the acquisition of securities of an issuer. Members of a group can either file jointly on one Schedule 13G or may each individually file a Schedule 13G and disclose that they are part of a group.

The SEC and the courts have held that an individual’s control over a group of related entities made the individual the indirect beneficial owner of stock held by such entities. However, a precondition for such a finding is that the individual has control (i.e., voting or investment power) of the shares held by each of the related entities. Where no such control exists for a given entity, that entity’s shares would not be aggregated for the purpose of Section 13(d).
How do I calculate my beneficial ownership?

The percentage of the class owned by a stockholder equals the total number of shares beneficially owned by the stockholder divided by the total number of shares of the class outstanding. As described above, the number of shares beneficially owned must include all shares beneficially owned, including those of group members and related entities.

The number of shares outstanding can be found on the cover of the issuer’s most recent Form 10-Q or Form 10-K and may also be found in the issuer’s proxy statement or a Securities Act registration statement registering the sale of common stock. The calculation should use the number of outstanding shares stated in the most recent SEC filing or if the stockholder is aware of a change in the number of shares outstanding since the most recent SEC filing, the stockholder should use the updated information.

Any number of shares that would be issued upon conversion or exercise of derivative securities should be added to the total number of outstanding shares when calculating that stockholder’s beneficial ownership. However, the stockholder should not include the shares that may be issued upon conversion or exercise of derivative securities held by other stockholders.

Each person that reports beneficial ownership on a Schedule 13G must sign the Schedule 13G. Using the example above, if a sole stockholder, company and subsidiary are all reporting beneficial ownership of shares held of record by the subsidiary, there should be a separate signature line for each of them. The EDGAR filing would be made using the EDGAR codes of one of the reporting persons.

Further, the rules also require that a joint filing agreement be filed as an exhibit to the Schedule 13G, acknowledging that the Schedule 13G is filed on behalf of each of them and that each is individually responsible for the timely filing, completeness and accuracy of the filing. Once a joint filing agreement is filed on a Schedule 13G or amendment, if there are no changes, it can be incorporated by reference in any subsequent Schedule 13G amendment, and need not be re-filed.