Disclosure Requirements

Let’s take a closer look at some of the rules and regulations your company will have to follow once you start selling shares on one of the stock exchanges.

Most of the disclosure requirements for publicly-held companies date back to the securities acts of the 1930s which established the Securities and Exchange Commission (SEC). By law, companies are required to:

• File quarterly and annual financial statements with the SEC
• Make their quarterly and annual financial statements available to shareholders and anyone else in the world who wants to read them
• Hold annual stockholder’s meetings and allow the stockholders to vote on key issues related to the company management
• Inform the public of any possible risks that might be associated with investing in the company
• Disclose information about the upper management of the company, such as the amount of stock owned and the amounts of salaries and bonuses  
• Disclose key financial decisions or actions that are taken, such as entering into loan agreements or lease agreements 

There are many other legal requirements and reports that a public company must file in addition to the ones just listed. These can be cumbersome and expensive to compile, but it is part of the bargain you made with the SEC to become a publicly-traded company.

You will be paying more in annual accounting and legal fees, which many companies find frustrating. Further, disclosing some of this information can be embarrassing. On the next page, you’ll find out why…