The amendments to item 101(c) add as a disclosure subject the description of the registrant`s human capital resources and realign regulatory compliance information to include all significant government regulations, not just environmental laws. On August 26, 2020, the Securities and Exchange Commission («SEC») passed amendments (the «adoption release») to modernize the disclosure requirements for company description (Section 101), legal process (Section 103) and risk factors (Section 105) that listed companies must comply with under Regulation S-K. The final amendments are essentially in the same form as the one proposed in August 2019 (the «Proposed Disclosure») and are intended to simplify disclosure requirements and promote flexibility and disclosure requirements based on company-specific principles rather than a more stringent disclosure system. The changes are summarized below and will be effective 30 days after they are posted in the Federal Register. While the changes have not yet been published in the Federal Register due to historical practice, we expect the changes to take effect before the end of October. Section 103 requires a registrant to disclose all matters relating to ongoing legal proceedings other than routine ordinary proceedings involving the declarant or any of its subsidiaries or property. The disclosure should include information on the court or body before which the proceedings are pending, the date of commencement and the main parties, as well as a description of the alleged factual basis and the appeal sought. The licensee shall also disclose any environmental proceedings involving a government agency, unless the licensee has reason to believe that doing so will result in penalties of less than $100,000. On August 26, the SEC voted to pass amendments to modernize the business description (Section 101), litigation (Section 103) and disclosure of risk factors (Section 105) that registrants must make under Regulation S-K. The changes reflect the SEC`s continued evolution toward a principles-based, registrant-specific approach to disclosure. Section 103 currently requires disclosure of all documents pending in legal proceedings, with the exception of ordinary routine litigation relating to the transaction involving or holding a company or one of its subsidiaries. Disclosure is also required for essential procedures known to be considered by government agencies.
Subject to certain exceptions, disclosure is not required for negligence or other claims normally arising out of a company`s business, unless such proceedings differ from the normal nature of such actions, or for proceedings that primarily involve a claim for damages where the amount, excluding interest and costs, does not exceed 10% of a company`s current assets. Information required under Section 103 may overlap with information required by U.S. GAAP, resulting in duplication of information (although the dollar threshold in Section 103 generally does not require disclosure of procedures in many cases where disclosure would be required under U.S. GAAP). The amendments revise item 103 to allow for the necessary information by establishing hyperlinks or cross-references to disclosure of legal proceedings elsewhere in the filing, such as in the notes to the financial statements. On August 26, 2020, the U.S. Securities and Exchange Commission («SEC») adopted amendments to the disclosure requirements under Section 101 – Description of Transaction, Section 103 – Litigation and Section 105 – Risk Factors of Regulation S&K to «modernize» disclosure requirements to provide investors with more useful information about the registrant`s securities. reduce the burden on registrants, disclose matters that may be irrelevant to their business, and allow registrants to tailor disclosures more closely to their particular circumstances.
These rules had not been substantially revised in over 30 years and, due to changes in the economy, technology, availability of information, inflation and other areas, some disclosures made under these items had become generic, repetitive or unimportant and, therefore, of limited use to investors and difficult to navigate for registrants. (a) Briefly describe all pending legal proceedings, other than ordinary routine litigation relating to the Company, in which the Registrant or any of its subsidiaries is involved or held. Please indicate the name of the court or body before which the proceedings are pending, the date of initiation, the main parties, a description of the facts on which the proceedings are to be based and the appeal sought. Include similar information on these procedures that are known to be considered by government agencies. Information may be provided by hyperlinks or references to disclosure of legal proceedings elsewhere in the document, such as in Management`s Discussion and Analysis (MD&A), risk factors and closing notes. (3) Administrative or judicial proceedings (including proceedings that raise substantially the same issues) arising from federal, state, or local regulations enacted or enacted to regulate the release of materials into the environment or primarily to protect the environment. These procedures will not be considered «ordinary routine litigation relating to the transaction» and will be described if: In addition, the amended section 103 allows registrants to choose a different threshold that they believe is reasonably designed to result in the disclosure of significant environmental processes, provided that the threshold is the lower of $1 million or one per cent of the current assets of the registrant and his or her subsidiaries on a consolidated basis. The different thresholds (including changes) must be disclosed in each annual and quarterly report. (2) This is primarily a claim for damages if the value of the claim, excluding interest and costs, does not exceed 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. However, where a proceeding raises roughly the same questions of law or fact as other known ongoing or planned proceedings, the amount of that other proceeding shall be included in the calculation of that percentage. Currently, section 103 also requires a company to disclose all proceedings under environmental laws (or several proceedings that raise the same issues) involving a government agency, unless it has reason to believe that doing so will not result in penalties of $100,000 or more. This lower disclosure threshold was previously adopted by the SEC because it believed that disclosure of fines by government agencies might be more important in assessing a company`s environmental performance, as government fines are more likely to indicate possible illegality or conduct contrary to public policy.
In addition, environmental procedures must be disclosed if they are material to the company`s business or financial position (regardless of exceptions for routine or routine procedures or the 10% working capital threshold). The amendments revise item 103 to increase the monetary threshold to $300,000, but to allow a company to choose another threshold it considers appropriate to disclose significant environmental procedures, provided that the company-specific threshold does not exceed the lower of $1 million or one per cent of the company`s working capital. Such a company-specific threshold must be specified by the company in each Form 10-K and Form 10-Q filing. These disclosure requirements have not been substantially revised in over 30 years. The amendments adopted by the Commission update these points to take account of the many changes that have taken place in our capital markets and in the national and global economies in recent decades. In order to minimize repeated or duplicate disclosures under this section, the amendments to section 103 allow a registrant to use hyperlinks or cross-references to other sections of a submission that provide the same details, such as the MD&A, risk factors or closing notes.