Form 8-K is one of the most common forms filed with the Securities and Exchange Commission (SEC) to broadly notify investors about important events or information that may affect shareholders. According to the Securities Exchange Act of 1943, all public (publicly-traded) companies must submit the form when appropriate.
An image of this form appears below.
Form 8-K is typically used as a form of notification for major events, such as a company filing for bankruptcy, making changes to company personnel – such as the removal/retirement of a chief executive officer (CEO) – or other similar events. The form must be filled out and filed with the SEC within four days of the occurrence of an event that triggers the need for a company to submit an 8-K. Timely filing of form 8-K makes it easier to transfer the information contained in the 8-K to quarterly reports that are submitted on forms such as Form 10-K and Form 10-Q.
Form 8-K is required of all publicly-traded companies when they experience a “material” event that may shape investor decisions regarding the company.
Form 8-K is designed to be an “immediate” notification system to investors and analysts. Therefore, it must be filled out and filed within four business days of any material event.
Events that qualify as “material” include filing for bankruptcy, failure to comply with exchange listing requirements (and, thus, becoming delisted from the trading exchange), and changes to major company personnel (namely, the executive board).
When to Use Form 8-K
Again, Form 8-K must be filled out and filed by a public company any time a “material” – i.e., significant – event occurs. However, there may be some question as to what exactly constitutes a significant event? The significance of some events – for example, the departure of an executive with a lofty job title but who, in fact, isn’t all that critical to the company’s operations – may be debatable. Most companies err on the side of caution, and may sometimes file an 8-K form for events that wouldn’t necessarily require it.
In some situations, the need to make an 8-K filing is unquestionable. As previously mentioned, a company forced into bankruptcy definitely must submit an 8-K to inform investors of the situation. Other possible filing triggers include:
Signing new agreements or making amendments to previously established agreements
Changes to fundamental business policies or practices
Being removed from a securities exchange (delisted)
Changes to shareholders’ rights
The election, dismissal, or departure of key personnel, e.g., company executives
Changes to the period specified as the company’s fiscal year
New or modified financial statements or other financial documentation
As an investor, it is important to read through any Form 8-K filed by companies you’ve invested in, or may be considering making an investment in. Information contained in the form may substantially impact your investment decisions.
Reading a Form 8-K
Reading a Form 8-K for information depends a lot on the reason for which a company files the form. There are, again, a number of reasons why a company must file the form. To get a better understanding of how reading an 8-K form can be helpful to investors, consider the following:
In the event that a company files for bankruptcy, the Form 8-K should provide an outline for how the company intends to reorganize itself under Chapter 11 or Chapter 7 (bankruptcy or liquidation). This is important for investors because it must include pertinent information about the company’s stock and when it plans to come out from under bankruptcy, if at all.
In the event that a company is being delisted from an exchange, a Form 8-K is required as a means of notification to investors. In many cases, this event occurs because the company’s stock has consistently traded below the exchange’s minimum required price for an extended period of time. The form identifies the specifics of why a company is in non-compliance with the exchange listing requirements. Most companies are given a grace period to return to being in a state of compliance with all exchange requirements before they are removed entirely.
CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following CFI resources will be helpful: