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Reassessing Exchange Act Filing Status – Securities



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For public companies with a calendar year-end, now is the time
of year for a company to conduct its public float calculation that
will determine its Exchange Act reporting status as an accelerated
filer, large accelerated filer, non-accelerated filer, smaller
reporting company (SRC), and/or emerging growth company (EGC). The
following is a very brief summary of the complex rules that govern
filer status and qualification as an SRC or EGC.

For calendar year-end companies, a company’s filing status
for Exchange Act reporting purposes is determined based in part on
the company’s public float as of the end of the second fiscal
quarter. As such, public companies with a calendar-year end should
perform their public float calculations as of June 30, 2022 to
determine what their filing status will be as of December 31, 2022
so that they can plan their SEC filing calendar accordingly. The
filing status will determine the due date for the Form 10-K for the
fiscal year ended December 31, 2022, as well as the due dates for
the three 10-Qs filed in 2023.

Public float, or public float and the company’s total
revenues for its most recently completed fiscal year, will also
determine whether the company can take advantage of the scaled
disclosure accommodations for SRCs. Among the most significant of
the scaled disclosure accommodations are an exemption from the
requirement to file the Sarbanes-Oxley Act Section 404(b) auditor
attestation on the company’s internal control over financial
reporting with the company’s Form 10-K (assuming the company
also meets the definition of non-accelerated filer), an exemption
from the requirement to include Compensation Discussion and
Analysis in the company’s definitive proxy statement, and the
ability to file audited financial statements for two years rather
than three years with the Form 10-K. SRCs can, in general, take
advantage of some, all or none of the available scaled disclosure
accommodations, and can do so as early as the Form 10-Q for the
second fiscal quarter of the current year. An SRC that does so must
check the SRC box on the cover page of the Form 10-Q report, and
all companies that qualify as an SRC are required to check the SRC
box on the cover page of the Form 10-K report and the three
subsequent Form 10-Q reports filed during that fiscal year.

Although most companies that qualify as an SRC will be
non-accelerated filers, those that have a public float of $75
million or more to less than $250 million as of June 30, 2022 and
had annual revenues of $100 million or more for the fiscal year
ended December 31, 2021 will be accelerated filers even though they
are SRCs.  Among the important results of being an SRC and an
accelerated filer are (1) the exemption from filing the SOX 404(b)
auditor attestation is not available and (2) the SRC must file its
Form 10-K and Form 10-Q reports not later than the due date for
accelerated filers.

Public float does not affect eligibility for EGC status, but can
indirectly affect termination of EGC status. If an EGC becomes a
large accelerated filer, its EGC status will terminate as of the
last day of the current fiscal year.  EGCs are also eligible
for scaled disclosure accommodations, although these differ in some
respects from those available for SRCs.  Unlike SRCs that lose
SRC status, EGCs that lose EGC status must in many cases comply
with the disclosure requirements that apply to operating
companies in the next applicable filing.

The public float calculation is determined based on the
aggregate worldwide market value of the voting and non-voting
common equity held by the company’s non-affiliates using the
closing stock price as of the last business day of the
company’s most recently completed second fiscal quarter, or
June 30, 2022 for calendar year-end companies. Thus, a calendar
year-end company will need to determine as of June 30, 2022, its
number of shares outstanding, its closing stock price, and the
number of shares held by non-affiliates, which sometimes requires a
complex analysis of affiliate status, in order to determine its
public float.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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