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SEC 7100 - Preparation of proxy statements
Publication date: 30 Jun 2023
us PwC SEC Volume 7100
.1 General
.11 What is the difference between a proxy and a proxy statement?
A proxy is a device whereby a stockholder authorizes another person or group of persons to act for them at a meeting of stockholders. A proxy statement is the document containing the information necessary to assist a stockholder in voting on the matters for which their proxy is solicited. Although the SEC cannot require corporate management to solicit proxies, Section 14(a) of the Exchange Act gives the SEC authority to prescribe the manner in which proxies are solicited (including the form and content of the proxy statement).
The SEC’s rules relating to the solicitation of proxies and the preparation of proxy statements are contained in Regulation 14A (Exchange Act Rules 14a-1 through 14a-104). The proxy statement disclosure requirements are set forth in Schedule 14A (Exchange Act Rule 14a-101) which is available at https://www.ecfr.gov/current/title-17/chapter-II/part-240/section-240.14a-101.
Companies should consider consulting with their legal counsel to determine when proxies must be solicited and the form and content of the proxy statement and accompanying materials.
.2 Financial statements requirements
.21 Where can I find the historical financial statement requirements applicable to a proxy statement prepared in connection with a merger or acquisition?
Item 14 of Schedule 14A specifies the transaction-related disclosures and financial and other company-specific information required for proxy statements involving acquisitions and mergers. The requirements for acquirer and target financial statements in proxy statements depend on whose proxies are solicited and the nature of the consideration. See SEC FRM 1140.3-.4 and SEC FRM Topic 2200. See also SEC FRM 10220.6-.7 regarding situations in which the SEC staff will permit the inclusion of only two years of target financial statements.
[Editor’s note: There are situations in which historical financial statements of the target business (or acquired business) may not be required in a proxy statement. However, registrants are required to comply with the S-X 3-05 financial statements requirements of an acquired business in a Form 8-K filing, even if audited financial statements of the acquired business are not presented in the proxy statement.]
See SEC 7100.901 for additional guidance.
.22 What are the historical financial statement requirements applicable to a proxy statement prepared in connection with a business to be disposed?
If authorization is sought from shareholders for the disposition of a significant business (including spin-offs), unaudited financial statements of the to be disposed business should be provided in the proxy materials for the same periods that are required for the registrant (along with pro forma information). However, audited financial statements of the to be disposed business should be provided if they are available.
See SEC FRM 1140.6 and SEC FRM 2120.2. See also Question 6 under section I.H of the third supplement to the SEC’s Manual of Publicly Available Telephone Interpretations issued in July 2001 (includes interpretations issued July 2000) available at https://www.sec.gov/interps/telephone/phonesupplement3.htm
[Editor’s note: The SEC staff has not established a bright line threshold of significance. See Topic III.F. of the highlights of the July 2017 meeting of the CAQ SEC Regulations Committee.]
[Editor’s note: If the registrant (seller) receives consideration for the disposal that includes unregistered securities of the acquirer, the acquirer’s audited financial statements may need to be provided for each of the 2 most recent fiscal years plus unaudited interim periods. See SEC FRM 1140.6.]
.23 Where can I find the historical financial statement requirements applicable to a proxy statement prepared in connection with the authorization, issuance, exchange or modification of securities?
Item 13 of Schedule 14A specifies the financial and other company information required to be included or incorporated by reference in a proxy statement if action is to be taken to authorize, issue, exchange or modify securities. See SEC FRM 1140.2.
[Editor’s note: See Note A to Schedule 14A for guidance in connection with a proxy solicitation for the purpose of approving the authorization of additional securities to be used to acquire another specified company and the registrant’s securityholders will not have a separate opportunity to vote on the transaction.]
.24 What are the historical financial statement requirements relating to a recently acquired business of the target in connection with a proxy statement prepared in connection with a merger or acquisition?
The third supplement to the SEC’s Manual of Publicly Available Telephone Interpretations issued in July 2001 (includes interpretations issued July 2000) contains SEC staff guidance on situations where the target or the acquired company recently completed an acquisition of a business.
See questions 3 and 4 under section I.H of the third supplement to the SEC’s Manual of Publicly Available Telephone Interpretations issued in July 2001 (includes interpretations issued July 2000) available at https://www.sec.gov/interps/telephone/phonesupplement3.htm.
See SEC 7100.901 for additional guidance.
.3 Audit considerations
.31 What are the audit considerations relating to a non-reporting target’s financial statements?
In connection with a proxy statement, the financial statements of a non-reporting target other than a target of a SPAC must be audited for the latest fiscal year if practicable. The audit of those financial statements can be performed in accordance with AICPA auditing standards. See SEC FRM 4110.5 #6. The financial statements for prior years do not need to be audited if they were not previously audited.
In transactions where the registrant is a special-purpose acquisition company, the target's financial statements become those of the registrant upon consummation of the merger. In light of this fact and that the SEC staff considers the transaction to be equivalent to an initial public offering of the target, the SEC staff would expect the financial statements of the target included in the proxy statement to be audited in accordance with the standards of the PCAOB.
[Editor's note: Registrants are still required to comply with the financial statement requirements of an acquired business in the Form 8-K filing, even if audited financial statements of an acquired business are not presented in the proxy statement.]
See SEC FRM 1140.5.
.9 Frequently asked question
.901 Does the provision of S-X 3-06(a)(2) permitting the filing of an acquired company’s financial statements covering a period of 9 to 12 months apply to Schedule 14A?
No. The provision of S-X 3-06(a)(2) permitting the filing of financial statements covering a period of 9 to 12 months to satisfy the one-year financial statement requirement for an acquired business does not apply to financial statements of target companies filed under Item 14(c)(2) of Schedule 14A. SEC FRM 1140.8.
[Editor’s note: The SEC amended S-X 3-06 in 2020. Although the references in SEC FRM 1140.8 have not been updated to conform to the amended version of S-X 3-06, we understand that the guidance has not changed.]
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