For many companies, the weeks leading up to proxy season is a deceptively tricky time to access the capital markets. During the period beginning when a company files its annual report on Form 10-K and ending when it files its definitive proxy statement, some companies unwittingly may shut themselves out from being able to conduct offerings unless they make advance preparations.
The pitfall arises due to the following common practice: Many companies forward incorporate by reference the compensation and other information required by Part III of Form 10-K from their definitive proxy statements which they intend to file later. For example, a company may file its Form 10-K (omitting compensation discussion & analysis (CD&A) and other Part III information) on February 15, 2012, but not file its definitive proxy statement (containing the previously omitted Part III information) until April 15, 2012. During this two-month period, not all of the information required to be included in the company’s Form 10-K would be on file with the SEC.
This convenience of obtaining additional time to prepare Part III information (some of which is indisputably time-consuming), however, has an important trade-off for a particular category of companies. For these companies, the SEC will not declare their shelf registration statements effective during this period and these companies therefore may be prevented from accessing the public markets.
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