27 December 2017

Checklist of routine annual and other activities to be completed by voluntary filers


This memorandum lists typical activities for a voluntary filer and its Board of Directors. Since voluntary filers do not need to maintain Audit, Compensation or Nominating Committees, this memorandum assumes that no such Committees exist. Please note that, in any particular situation, additional activities may need to be completed, not all of the activities mentioned apply to all situations and each company’s activities will depend on its governing documents.

Board of Directors

  • Questionnaires. Complete Directors’ and Officers’ Questionnaires; update form of Questionnaire to add questions arising out of recent rule changes or changes in company circumstances
  • Directors. Elect directors and adjust Board size as appropriate
  • Budget. Grant annual operating authority to officers and employees, by approval of an Annual Business or Operating Plan, Capital Expenditure/Investment Program or other comparable procedure
  • General. Adopt general enabling and ratifying resolutions as appropriate

Board of Directors (at annual Organizational Meeting)

  • Director Appointments. Appoint Chairperson of the Board, if any
  • Schedules. Establish annual schedule for regular Board meetings
  • Officer Elections.
    • If term of office expires annually, re-elect officers
    • Elect new officers, if any

Board Performing Additional Functions of a Compensation Committee

  • CEO Compensation.
    • Review actual and proposed incentive and equity-based compensation of CEO for prior year and approve proposed incentive compensation or achievement of related targets
    • Establish base and proposed incentive and equity-based compensation of CEO for current year
      • Evaluate prior year’s performance, including performance against prior year’s targets
      • Establish current year’s targets, if any
  • Other Executive Officer Compensation.
    • To the extent discretionary, approve proposed incentive compensation or achievement of related targets, for prior year, of other executive officers and employees, consistent with oversight responsibility
    • Approve proposed incentive compensation (including related targets, if any) and equity-based compensation, for current year, of other executive officers and employees, consistent with oversight responsibility
  • Director Compensation. Review and revise (as appropriate) compensation of directors
  • Employee Compensation. Review and determine whether risks exist that relate to employee compensation policies and practices that are reasonably likely to have a material adverse effect, and consider whether to implement (or amend) risk assessment/mitigation procedures or change such policies and practices
  • Related Party/Affiliate Transactions. Evaluate compensation or other benefits received by directors or executive officers from or through affiliated/related entities and review such compensation as to compliance with Code of Conduct/Ethics (as applicable), applicable law and company’s governing documents

Board Performing Additional Functions of an Audit Committee

  • Auditors. Select auditors for current year
  • Audit Services and Permitted Non-Audit Services. Pre-approve all audit services and all permitted non-audit services, subject to certain exceptions
  • Related Party Transactions. Review and evaluate related party transactions, if desired
  • Swaps. Consider whether Board should approve entry into swap and derivative transactions in compliance with SEC rules (if reliance on “end-user exception” for swaps and derivatives is being sought)
  • Financial Statements.
    • Review and approve annual financial statements for inclusion in Annual Report on Form 10-K
    • Review and approve interim financial statements for inclusion in Quarterly Reports on Form 10-Q
  • Whistleblower Program. Review and revise (as appropriate) whistleblower programs and policies
  • PCAOB Auditing Standard 18. Auditing Standard No. 18 superseded Auditing Standard Section 334 and expanded audit procedures required to be performed with respect to (1) related party transactions, (2) significant unusual transactions and (3) financial relationships and transactions with executive officers (including executive compensation); consider:
    • ensuring that appropriate authorizations and approvals are in place and transactions are documented
    • whether Board (acting as Compensation Committee) should be part of discussions with auditors regarding compensation arrangements
    • reviewing related party transaction policies to evaluate whether any changes should be made
    • addressing expanded set of required management representations about related party transactions and significant unusual transactions
  • PCAOB Standards on Critical Audit Matters. Consider possible need for policy or procedure changes in light of new PCAOB auditing standards as to “critical audit matters” going into effect for fiscal years ending on or after June 30, 2019 for large accelerated filers and December 15, 2020 for all other companies
  • Global Standard on Revenue Recognition. Evaluate impact of FASB Topic 66 (replacing FASB Topic 65) which comprehensively overhauled existing revenue recognition rules for reporting periods beginning after December 15, 2016 for US public companies and after December 15, 2017 for US private companies
  • FASB Guidance on Going Concern Evaluation/Disclosure. Consider whether to change policies or procedures in light of FASB guidance placing greater responsibility on management to evaluate and disclose a company's ability to continue as a going concern, updating GAAP to require management of both public and private companies to take part in evaluating conditions that may affect the ability to continue as a going concern, effective for annual periods that ended after December 15, 2016
  • Non-GAAP financial measures. Consider 2016 SEC Compliance and Disclosure Interpretations updates on the use and presentation of non-GAAP financial measures, to address increasing concerns that non-GAAP financial measures were being used improperly, including that free cash flow is a liquidity measure that must not be presented on a per share basis

Other Activities

  • Annual Report on Form 10-K.
    • File Form 10-K with SEC
    • New voluntary filers, that changed status from non-voluntary filer, should not check the Form 10-K cover page box indicating that it filed all Section 15(d) reports during the prior 12 months (but (as applicable) should add an explanatory note that it filed all Exchange Act reports for the prior 12 months, as described in C&DI 204.05 (September 2008), and should include in Form 10-K the compensation, beneficial ownership and other information (including Compensation Discussion and Analysis) that would have otherwise incorporated by reference from proxy statement (even though no proxy statement need be filed)
    • Include pay ratio disclosure required by Regulation S-K Item 402(u), requiring public companies to disclose the ratio of their CEO compensation to their median employee compensation, commencing with their first fiscal year beginning on or after January 1, 2017, in registration statements and annual reports requiring compensation disclosure (subject to transition periods for new companies and companies engaging in M&A transactions, and exclusions for companies such as smaller reporting companies, emerging growth companies and foreign private issuers)
    • Consider whether to add a summary section to the Form 10-K as allowed starting in 2016, so long as each item in the summary “is presented fairly and accurately” and includes a cross-reference by hyperlink to the more detailed material contained in the Form 10-K to which the item relates
    • Assess need to report on mine safety and conflict minerals
    • No need for resource extraction issuers to report on resource extraction following the elimination of such rules in 2017
    • Include in the Form 10-K (and Quarterly Reports on Form 10-Q) disclosure reportable under Exchange Act Section 13 ( r ) relating to the Iran Threat Reduction and Syria Human Rights Act of 2012
      • Simultaneously file IRANNOTICE form on EDGAR if disclosure is so made
    • Consider Sustainability Accounting Standards Board (SASB) recently published Implementation Guide for Companies, for companies that are in the process of integrating SASB standards into their existing Form 10-K or 20-F disclosure processes, to help companies achieve their objectives of (i) identifying industry-specific sustainability topics that are most likely material to an investor, (ii) understanding the current state of disclosure and performance regarding those topics, and (iii) enhancing existing reporting processes to more effectively disclose material information on sustainability topics
  • Website Posting/Disclosure. For a list of complete SEC website posting requirements, see Schedule A attached hereto
  • Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Frameworks. As of 2017, the 2013 COSO Framework (comprehensively updating its 1992 Framework) should be used to evaluate effectiveness of internal controls over financial reporting; and in September 2017 COSO updated its 2004 Enterprise Risk Management (ERM) – Integrated Framework, used widely used by management to enhance ability to manage uncertainty and consider how much risk to accept (previously updated in 2013); internal controls and ERM are interrelated since internal controls make ERM more effective when control activities in place over risk responses and ERM helps in developing objective used as basis for developing internal controls
  • Cybersecurity Risks and Breaches. Consider including or adding to disclosure as to cybersecurity as a risk factor; consider disclosure of cybersecurity breaches or other incidents, in light of SEC's stated advice in 2017 that while it has not yet pursued proceedings against public companies with inadequate cybersecurity disclosure before or after breaches or other incidents, it could in fact take enforcement action against such companies in the future
  • Political Risks. Consider whether changes initiated by Trump administration require changes to risk factors, such as tax reform, healthcare, energy, environment, financial regulation, international trade, immigration policy and general legislative / regulatory uncertainty concerns
  • Financial Stability Board Guidance on Climate-Related Financial Risk. Consider recent Financial Stability Board (FSB) recommendations for voluntary climate-related financial risk disclosure standards applicable to regulatory filings, chiefly for companies in the financial industry, including: governance around climate-related risks and opportunities; actual and potential impacts of climate-related risks on a company's business, strategy and financial planning; processes used to identify, assess and manage climate-related risks; and metrics used to assess climate-related risks and opportunities
  • Other.
    • Exclusive Forum. Consider amending By-laws to provide that local state court (in the case of a Delaware corporation, for example, the Delaware Court of Chancery) shall be the sole and exclusive forum for any derivative action, any breach of fiduciary duty action, any claim under the relevant jurisdiction’s corporate laws or the Certificate of Incorporation or By-laws, or any claim governed by the internal affairs doctrine
    • UK Anti-Trafficking Act. Consider whether UK Modern Slavery Act 2015 applies, requiring many UK companies (as well as many non-UK companies with UK operations) to prepare a statement disclosing steps (if any) that they have taken to ensure that there is no slavery or human trafficking in their businesses and supply chains; relates to organizations that supply goods or services and have a consolidated global revenues of £36 million or more annually which must publicly post a “slavery and human trafficking statement” for each financial year, within six months after fiscal year end
    • Severance Agreement Language. Consider whether Company's severance agreements include a provision that clarifies employees' rights to disclose information to interested government agencies, in light of a 2016 SEC enforcement action imposing a significant fine on a company that included in its severance agreements provisions that impeded former employees' participation in an SEC whistleblower
    • FCPA Matters. Confirm that procedures gather sufficient information about government-related parties with whom Company conducts business so as to ensure Foreign Corrupt Practices Act compliance; consider November 29, 2017 DOJ guidance that many policies adopted in its 2016 pilot FCPA program (relating to criteria for evaluating compliance and ethics programs' effectiveness) would be incorporated in US Attorneys' Manual and become more permanent
    • Corporate Compliance Program Review. Consider adopting or updating corporate compliance program in light of 2017 publication by Fraud Section of the US Department of Justice Criminal Division entitled “Evaluation of Corporate Compliance Programs”

Authors

Schedule A - SEC Website Posting Requirements

Document/Action

SEC Requirement

Document/Action

Audit, Compensation and Nominating Committee Charters

SEC Requirement

No posting requirement

Document/Action

Code of Conduct / Code of Ethics portion of Code

SEC Requirement

Code of ethics [1] portion only: No posting requirement for code of ethics, but if not posted, must be Form 10-K exhibit or Form 10-K undertaking to provide; if posted on website, need Form 10-K disclosure of website address and availability on website

Document/Action

Corporate Governance Guidelines

SEC Requirement

No posting requirement

Document/Action

Lead Independent Director

SEC Requirement

No posting requirement

Document/Action

XBRL Interactive Data files

SEC Requirement

If an interactive data file is filed with the SEC, the Company must post such interactive data file on its website, if it maintains one, by the end of the calendar day on the earlier of the date the interactive data file is submitted or is required to be submitted, and, must remain accessible on the website for at least 12 months (Reg. S-T, Rule 405)

Footnotes

[1] Code of ethics to include standards as reasonably necessary to promote (i) honest and ethical conduct, including ethical handling of actual or apparent conflicts of interest between personal and professional relationships, (ii) full, fair, accurate, timely and understandable disclosure in SEC periodic reports and other public communication, (iii) compliance with applicable laws, rules and regulations, (iv) prompt reporting of violations of the code, and (v) accountability for adherence to code (SOX Section 406).