SEC Form 20-F

SEC Form 20-F refers to a filing document required by the Securities and Exchange Commission (SEC) for foreign-based companies whose stocks are listed on U.S. exchanges. These companies must file their annual report within four months of the fiscal year-end date or if this date changes.

The Securities Exchange Act of 1934 declares the eligibility criteria and reporting requirements for annual report filling in SEC form 20-F. Such filling ensures reporting procedure and requirements standardization for foreign private issuers, including non-Canadian and non-American firms.  Moreover, it safeguards investors' interest as they can track the financial position of these listed foreign companies.

The SEC Form 20-F is a standard format for filing annual reports by organizations based outside of the U.S. or Canada. These organizations have their securities listed and traded on U.S. exchanges like the New York Stock Exchange. These companies are termed as foreign private issuers (FPIs). All the regulatory, eligibility, and reporting requirements for these companies are declared under the Securities Exchange Act of 1934. This form is available on the SEC website and consists of 16 pages. 

Any company based in Canada that has outstanding stocks of at least USD 75 million and reports its finances to the Canadian Regulatory Authority for a minimum of 12 months can file form 40-F for being listed on a U.S. exchange. After that, these FPIs can be filed from 20-F for every fiscal year. For companies not meeting these criteria, it's important to follow the SEC Form 20-F instructions for listing on a U.S. exchange. 

While the SEC finds the comprehensiveness, accuracy, and accounting policies and practices rigidity of the International Financial Reporting Standards (IFRS) similar to the Generally Accepted Accounting Principles (GAAP), the FPIs following the IFRS standards can also file in form 20-F without any reconciliation to the GAAP standards. 

The filling, reporting, and eligibility requirements for SEC form 20-F are declared by the Securities Exchange Act 1934. Some of the prominent filling requirements of the U.S. exchanges like the New York Stock Exchange include:

1. The NYSE mandates the listed foreign-based companies to disclose form 20-F on the company's website publicly.
2. These firms need to inform their shareholder about the availability of form 20-F through a press release.
3. The company needs to release an English statement informing the shareholders that they can request a hard copy of the audited financial statements free of cost. The company will send these statements to the shareholders as soon as possible.
4. Additionally, it is optional to serve the ESG reporting information for these companies. 

Any foreign private issuer who fails to submit form 20-F within four months from the end of their fiscal year undergoes section 802.01E procedures. In this case, the relevant exchange issues a notice to the listed foreign company, after which it has 6 6-month time frame, i.e., the cure period when the firm can comply with the regulation. However, if further non-compliance is observed after this grace period, the company may be subjected to severe consequences like its delisting from the exchange.

There are many SEC reporting software programs to help companies file Forms 20-F and stay ahead with recent amendments. However, the following considerations, in accordance with SEC Form 20-F rules, can help FPIs report their finances in this document efficiently: 

1. The cover page should include the SEC filing status;
2. Also, the table of contents should be revised to reflect changes in the scope of financial data reporting requirements.
3. The authorized person of the company can now place an electronic signature, provided the signing process meets SEC standards.
4. The FPIs should file item 161 with new regulations requiring companies to confirm that any foreign government does not regulate them.
5. The company should perform internal control over financial reporting (ICFR) language updates to align it with the recent regulatory changes. 

Also, these foreign-based listed companies don't require explicit consent from the authority to edit some confidential contractual information. Nevertheless, a different set of guidelines is applicable for renewing the previous confidential treatment orders, which are commenced under the guidance of the SEC staff. 

The conditions when filing form 20-F finds relevance can be understood through the following examples:

Example #1

Nokia Corporation, whose headquarters are situated in Espoo, Finland, has its securities listed on the New York Stock Exchange (NYSE). Thus, the company files SEC form 20-F under the Securities Exchange Act 1934 for every fiscal year ending on December 31. The company reports its financial performance across all sectors, such as network structure, mobile networks, cloud and network services, and Nokia technologies.

Example #2

Azure Power Global Limited has submitted its annual report on Form 20-F for the fiscal year ending March 31, 2023, to the U.S. Securities and Exchange Commission (SEC). The report is available on both the company's website and the SEC's website. Shareholders can request a free hard copy of the report from Azure. It launched India's first utility-scale solar project in 2009. It is a significant provider of sustainable energy solutions and a leading producer of renewable energy in India. 

The non-domestic companies that are listed on the U.S. exchanges are required to furnish their annual reports to the SEC. The advantages of such filing include:

• Standardizes Reporting Requirements: Form 20-F sets a standard for all foreign private issuers to report their annual financial statements in a specific format.
• Reflects Company's Financial Health: Such reporting helps the investors gauge the FPIs' financial position and viability.
• Shows Operational Efficiency: Also, it provides a detailed overview of the operational performance of these companies during a given fiscal year.
• Shapes Corporate Governance Practices: Form 20-F requires the listed foreign-based companies to adopt best corporate governance practices and serves as a disclosure of the same.
• Ensures Transparency: It fosters transparency and protection of the shareholders' rights by ensuring proper disclosure of these firms' finances.
• Facilitates Comparison: Such compliance enables the investors to compare between the domestic stocks and the securities of the FPIs.