Heads Up for the 2017 Proxy Season: Companies Can Post Annual Report on Website in Lieu of Mailing to SEC; New Line Item for Form 10-K

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Review your annual meeting checklist! After the end of last year’s proxy season, the staff of the Securities and Exchange Commission published a Compliance and Disclosure Interpretation that permits companies to post their annual report on their corporate website in lieu of mailing seven copies to the SEC.  This relates to the “annual report to shareholders,” which for some companies is a “10-K wrap,” that is required to be sent to shareholders with a company’s proxy statement (as distinguished from the Form 10-K itself, which must be filed on EDGAR).  If you choose to take advantage of this option, the annual report must be posted by the later of the date the report is first sent or given to shareholders or the date the proxy statement is first filed with the SEC (including, if applicable, a preliminary proxy statement filing), and must remain on the website for at least one year. NYSE-listed companies also need not send the annual report to the NYSE; however, three hard copies of proxy materials (including the proxy card) must be filed with the NYSE no later than the date on which the materials are released to shareholders. NASDAQ has no similar requirement.  Companies choosing the website posting option to satisfy the SEC requirement should coordinate appropriate personnel to ensure timely posting and to update policies for maintaining the report on the website for at least one year.

Companies should also remember to add a new line item (Item 16) to their Form 10-K.  Item 16 expressly gives companies the option to include summarized 10-K information with hyperlinked cross-references to the related, more detailed, disclosure in the Form 10-K or accompanying exhibit.  The SEC adopted this new item pursuant to the FAST Act, and given that it is optional and that including a summary would have also been permitted previously, the SEC does not believe the amendment will have a substantial impact on disclosure practices.  In their survey of a sample of 10-Ks filed in 2015, including all 10-Ks of companies in the Fortune 100, the SEC only identified one company that had a 10-K summary.  All companies should include the new item number and caption “Item 16.  Form 10-K Summary” in their Form 10-K, and, if not including a summary (as we expect will be the case), should indicate “none” or “not applicable.”