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1140 Proxy Statements
us SEC - Financial Reporting Manual
1140.1 Annual Meeting
An annual report to shareholders containing audited financial statements for the most recently completed year must accompany or precede a proxy statement relating to an annual meeting at which officers and directors will be elected.
1140.2 Other Solicitations
Financial statements may be required where action is taken to authorize, issue, exchange or modify securities, including when the authorization or issuance is in connection with a business combination. However, financial statements are not required if they would not be material for the exercise of prudent judgment concerning the action. Financial statements usually are considered material to this exercise if the action is the authorization or issuance of a material amount of senior securities or the authorization or issuance of securities related to a business combination. [Instructions to Schedule 14A Item 13]
1140.3 Business Combinations
(Last updated: 11/9/2016)
(Last updated: 11/9/2016)
The requirement for acquirer and target financial statements in proxy statements depends on whose proxies are solicited and the nature of the consideration. See Section 10220.7 for the number of years of target financial statements to be presented when one of the entities is an EGC.
Solicited Shareholders
| Consideration
| Financial Statements
| |
Acquirer only
| Cash only
| Financial statements of the target are required.
A non-reporting target may provide only 2 years + interims if it would otherwise meet the definition of a Smaller Reporting Company.
Financial statements of the acquirer are not required in the proxy statement unless they are material to an informed voting decision (e.g., acquirer financing is not assured) [Instruction 2(a) to Item 14 of Schedule 14A], since shareholders are presumed to have access to information about their company. This presumption is based on the acquirer being current with its 1934 Act reports. If otherwise, consult with CF-OCA.
Pro forma information is required if it is material to a voting decision.
| |
Acquirer only
| Exempt securities only or a combination of exempt securities and cash
| Financial statements of the target are required.
A non-reporting target may provide only 2 years + interims if it would otherwise meet the definition of a Smaller Reporting Company.
Financial statements of the acquirer are not required in the proxy statement unless they are material to an informed voting decision [Instruction 3 to Item 14 of Schedule 14A], since security holders are presumed to have access to information about their company. This presumption is based on the acquirer being current with its 1934 Act reports. If otherwise, consult with CF-OCA.
Pro forma information is required if it is material to a voting decision.
| |
Target only
| Cash only
| Financial statements of the target are not required in the proxy statement since security holders are presumed to have access to information about their company, unless it is a going private transaction. See Instruction 2(b) to Item 14 of Schedule 14A.
Financial statements of the acquirer are not required unless the information is material to an informed voting decision (e.g., acquirer financing is not assured). See Instruction 2(a) to Item 14 of Schedule 14A.
No pro forma information is required. | |
Target only
| Exempt securities only or a combination of exempt securities and cash
| Financial statements of the target are not required in the proxy statement since security holders are presumed to have access to information about their company, unless it is a going private or a roll-up transaction. See Instruction 3 to Item 14 of Schedule 14A.
Financial statements of the acquirer are generally required. Need only 2 most recent fiscal years and interim periods. The financial statement requirement of the acquirer applies to reporting and non-reporting companies.
Pro forma information is required, if material.
| |
Acquirer and target
| Cash only
| Financial statements of the target are required.
Financial statements of the acquirer are not required unless the information is material to an informed voting decision (e.g., acquirer financing is not assured). See Instruction 2(a) to Item 14 of Schedule 14A. If acquirer financial statements are required, only the 2 most recent fiscal years and interim periods need be provided.
Pro forma information is required if it is material to a voting decision by the acquirer's shareholders.
| |
Acquirer and target
| Exempt securities only or a combination of exempt securities and cash
| Financial statements of the target are required.
Financial statements of the acquirer are generally required. Only the 2 most recent fiscal years and interim periods need be provided.
Pro forma information is required, if material.
|
1140.4 Consideration to be Issued Includes Registered Securities
If the consideration to be issued in the business combination includes registered securities, registrants must comply with the financial statement requirements of Form S-4 or Form F-4. See Topic 2.
1140.5 Audit Requirement for Non-Reporting Target
(Last updated: 10/30/2020)
(Last updated: 10/30/2020)
In connection with proxy statements and registration statements on Form S-4/F-4, financial statements for the latest fiscal year must be audited if practicable.
Financial statements for prior years need not be audited if they were not previously audited. The staff will assess the merits of a registrant's assertion that an audit for the latest fiscal year is impracticable based on the particular facts and circumstances, including the specific actions taken by the registrant (acquirer) to obtain a timely audit of the target. For significant acquisitions, registrants will be obligated to file separate audited target financial statements in a Form 8-K. [Instruction 1 to Item 17.b.7 of Form S-4]
In transactions where the registrant is a SPAC, the target's financial statements become those of the registrant upon consummation of the merger. In light of this fact and that the staff considers the transaction to be equivalent to an initial public offering of the target, the staff would expect the financial statements of the target included in either a proxy statement or Form S-4/F-4 to be audited in accordance with the standards of the PCAOB.
1140.6 Disposal of a Business
(Last updated: 6/30/2012)
(Last updated: 6/30/2012)
In proxy statements soliciting authorization for the disposal of a significant business (including spin-offs), the registrant (seller) should include its audited financial statements for each of the 2 most recent fiscal years plus unaudited interim periods. Unaudited financial statements of the business to be disposed should be included for the same periods; however, audited financial statements for each of the 2 most recent fiscal years of that business should be provided if they are available. The registrant should include its pro forma financial information giving effect to the disposal for the latest complete fiscal year and subsequent interim period; if the disposal qualifies as a discontinued operation, the pro forma operating information should be presented for each of the past 2 years and interim periods. If three years plus interim historical financial statements are presented, then for discontinued operations, the pro forma financial statements should include three years plus interim periods. See the Division of Corporation Finance's July 2001 Interim Supplement to Publicly Available Telephone Interpretations, Section H6. 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.
1140.7 Reverse Acquisitions
The financial statement requirement of Item 14(c) of Schedule 14A follows the legal form of the transaction rather than the accounting form. For example, when a public shell company solicits authorization for the acquisition of a non-reporting operating company that will be accounted for as a recapitalization of the operating company, the "acquiring company" is the public shell and the "acquired company" is the operating company under Item 14(c). As such, the audit relief for non-reporting targets described above applies to the operating company. After consummation of the transaction, the registrant must file in a Form 8-K audited financial statements of the operating company, which will replace the shell's historical financial statements (as predecessor of the registrant) in future filings. See Topic 12.
1140.8 Application of S-X 3-06 to Target Financial Statements
(Last updated: 3/31/2009)
(Last updated: 3/31/2009)
The provision of S-X 3-06(b) permitting the filing of financial statements covering a period of nine to twelve 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.
NOTE: S-X 3-06 permits a registrant to file financial statements covering a period of nine to twelve months to satisfy a requirement for filing financial statements for a period of one year in the following circumstances:
Target company financial statements required to be provided in a proxy statement or Form S-4 are not provided pursuant to S-X 3-05. This is true even though the proxy statement and Form S-4 reference S-X 3-05 in some circumstances to determine the number of periods of target company financial statements to provide in the proxy statement or Form S-4. Because target company financial statements are not provided pursuant to S-X 3-05, the exception permitted in S-X 3-06(b) is not available for purposes of providing target company financial statements in a proxy statement or Form S-4. However, the exception in S-X 3-06(a) is available and companies may also make requests under S-X 3-06(c).
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