What is Form 8-K?
Form 8-K is filing which the publicly traded companies are required to make with the Securities and Exchange Commission (SEC) in order to announce the any unscheduled material events (delisting, policy changes, bankruptcy, Mergers and acquisitions etc) that its shareholders should know and it is in addition to the filing of annual reports and quarterly reports of the company on Form 10-K and Form 10-Q respectively.
Purpose
This is to inform the investors about any of the unscheduled material events occurring in the company so that the investors can taking their decision keeping in mind those facts. Generally, the events that qualify as the “material events” include filing the form 8-K for bankruptcy, changes taking place for the major personnel of the company i.e., its executive board and the case when there is any failure from the side of the company to comply with the various listing requirements of the company as with this the company gets delisted from a trading exchange in which it was listed. It acts as an immediate notification system for the investors along with the analysts as it is filed within the four business days from the date when such an event happens and even earlier in a few cases.
When to Use Form 8-K?
Some of the highlights of the disclosure items are as follows:
- Company’s delisting from an exchange
- In case of the fundamental business policy changes
- Changes happened to the rights of shareholders.
- Situation of Bankruptcy or Receivership
- Disposal or Acquisition of Assets
- Material Impairments
- Unregistered Equity Securities sale
- Any amendments in the Articles of Incorporation
- Changes pertaining to Control of Registrant
- Apart from the above, there are various other events that investors might want to read.
Uses and Importance
This is used to informing the existing investors as well as the potential investors of the company about the happening of the unscheduled material events in the company. This form is designed in such a way that it acts as an immediate notification system for the investors as well as for the analysts. The importance of Form 8-K is as follows:
- This report is in addition to the report filed by the publicly traded companies in form 10-K and Form 10-Q. Here the form 8-K plays an important role as it is filed within few days of happening of the event instead of waiting for some time to file the same of quarterly reporting Form 10-Q or annually reporting Form 10-K.
- It helps the investors and analysts in making the informed decision as their decision is based on happening of the events in the company in which they are investing their money or the company which they are analyzing for some purpose.
Reading Form 8-K
Generally, there are two major parts of this filing that includes name and description with respect to the event. The information depends on the fact for which form is filled by the company. For a better understanding consider the following some of the important situations:
- Material Definitive Agreement: In this case, the company is required to fill Form 8-K to inform the investors about any material agreements that are not made during ordinary business or when there are any material amendments against those agreements.
- Delisting of the Company From an Exchange: In case of delisting, the company is required to file 8-K to notify the investors about the same and provide specific regarding the reason of such non-compliance with listing requirements of an exchange
- Bankruptcy: In this case, the company is required to file 8-K to provide an outline regarding how the company is going to reorganize itself under Chapter 11 as such reorganization allows it to continue its operations but under the supervision of Chapter 7. Such information is important for the investors as it has pertinent information regarding shares of the company and its plan of dealing out of the situation.
- Acquisition or Disposal of Assets: In this case, the company is required to inform the terms and conditions of such transactions.
Difference Between Form 8-K and 10-K
The Form 8-K is the report that the publicly traded companies files with the SEC, whenever there occur any unscheduled material events in order to inform its investors about the same and companies, have to make most of the disclosures within the period of four business days from the date of triggering of the event and even earlier in few cases whereas form 10-K is the annual report filed by publicly traded companies with the Securities and Exchange Commission (SEC) every year that contains in-depth information about the company and its financial performance during that year and the same contains the details which are more than the details provided in the annual report of the company.
Conclusion
Form 8-K is an important report that publicly traded company files with the Securities and Exchange Commission (SEC) in case of happening of any unscheduled material event. This form is extremely common in the case of the publicly traded companies and any numbers can be filed by the companies throughout the quarter.
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