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
It is to inform the investors about any of the unscheduled material events occurring in the company so that the investors can make 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 significant 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 and the analysts as it is filed within four business days from the date when such an event happens and even earlier in a few cases.
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For eg:
Source: Form 8-K (wallstreetmojo.com)
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
It is used to inform existing and potential investors about 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-QForm 10-K And Form 10-Q10K contains all the details one wants to know about a company. It helps in analysis of company's future growth and to take wise investing decisions. 10Q is the company’s quarterly report and is less detailed than the annual report.read more. Here the form 8-K plays a vital role as it is filed within few days of happening of the event instead of waiting for some time to file the same quarterly reporting Form 10-Q or annually reporting Form 10-KForm 10-KPublic firms in the United States of America file Form 10-K. It is a detailed statement of the company's annual financial performance that is filed with the Securities and Exchange Commission (SEC) within 60 days of the end of the fiscal year.read more.
- 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, two significant parts of this filing include name and description concerning the event. The information depends on the fact for which the company fills the form. For a better understanding, consider the following some of the critical 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 vital 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 companiesPublicly Traded CompaniesPublicly Traded Companies, also called Publicly Listed Companies, are the Companies which list their shares on the public stock exchange allowing the trading of shares to the common public. It means that anybody can sell or buy these companies’ shares from the open market.read more files with the SEC whenever there occur any unscheduled material events to inform its investors about the same and companies, have to make most of the disclosures within four business days from the date of triggering of the event and even earlier in few cases. In contrast, 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 essential report that a publicly-traded company files with the Securities and Exchange Commission (SEC) in case of any unscheduled material event. This form is extremely common in publicly traded companies, and the companies can file any numbers throughout the quarter.
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