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Guest Article
(From the August 16, 2004 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)
Public companies will have to file Form 8-K more often and more quickly under new SEC rules scheduled to take effect on August 23, 2004. The new rules, which the SEC issued on March 16, 2004, add 8 new items to the list of events that trigger a Form 8-K disclosure requirement (called "triggering events") and shorten the filing deadline for most items to four business days after a triggering event occurs. One of the new triggering events is entry into, or material amendment of, a material definitive non-ordinary course agreement, which includes some executive compensation agreements.
The following discussion is for general information purposes only. The SEC's final regulations appeared in the March 25, 2004, edition of the Federal Register, at 69 FR 15594.
Background
The SEC proposed increasing the number of triggering events in June 2002, due to concerns that current rules permit public companies to delay disclosure of many significant events until the due dates for their next periodic reports. As a result, there may be an extended delay before the company's stock price reflects the effect of these events.
Later in the summer of 2002, Congress enacted the Sarbanes-Oxley Act in response to several high-profile corporate governance scandals. Section 409 of the Act requires public companies to disclose "on a rapid and current basis" material information regarding certain changes in a company's financial condition or operations. The Act gives SEC the authority to determine what changes are subject to this "rapid" disclosure requirement. The SEC believes the enhanced Form 8-K disclosure requirements will "further the goals" of this provision.
New Triggering Events and Executive Compensation Agreements
The 8 new items are:
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According to the final regulations, a material definitive agreement is "an agreement that provides for obligations that are material to and enforceable against the registrant, or rights that are material to the registrant and enforceable by the registrant against one or more other parties to the agreement, in each case whether or not subject to conditions." The final regulations specifically require Form 8-K disclosure when a public company enters into any of the following:
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However, the Form 8-K disclosure requirement will not apply if the relevant compensatory plan, contract or arrangement is available to employees, officers, or directors generally and provides for the same method of allocating benefits between management and non-management participants.
The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Tom Brisendine 202.879.5365, Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Taina Edlund 202.879.4956, Mike Haberman 202.879.4963, Stephen LaGarde 202.879.5608, J. D. Lutz 202.879.5366, Bart Massey 202.220.2104, Diane McGowan 202.220.2077, Martha Priddy Patterson 202.879.5634, Tom Pevarnik 202.879.5324, Tom Veal 312.946.2595, or Deborah Walker 202.879.4955. Copyright 2004, Deloitte. |
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