10K Legal Proceedings

(a) Briefly describe any ongoing legal proceedings, with the exception of routine ordinary disputes related to the Company in which the owner or one of its subsidiaries is involved or whose ownership is subject. 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 factual basis on which the proceedings are to be based and the appeal sought. Add similar information about these procedures that are known to be taken into account by government agencies. Information may be provided by hyperlink or by reference to the disclosure of legal proceedings elsewhere in the document, for example in the Management`s Discussion and Analysis, risk factors and closing notes. General development disclosure topics. Three of the four information topics on the non-exclusive list should be known to businesses based on the pre-amendment requirements: (1) bankruptcy or similar proceedings; (2) significant reclassifications or mergers and (3) acquisitions/disposals of assets. The fourth (new) topic concerns significant changes to a previously published corporate strategy. In its final rule, the SEC refused to define a „business strategy“ to allow companies to tailor this disclosure to their business. The SEC emphasized that the new principles-based approach to such disclosure should mitigate any deterrents in disclosing a business strategy, as companies have the flexibility to determine the appropriate level of detail for such disclosure based on materiality.

The U.S. Securities and Exchange Commission (SEC) recently passed changes to the rules that change the disclosures that publicly traded companies must make in their regular reports. The provisions affected by the amendments – paragraphs 101, 103 and 105 of Regulation S-K – concern the description of the company`s business activities, legal proceedings relating to environmental claims and risk factors. A public company`s annual reports on Form 10-K and quarterly reports on Form 10-Q contain the information required by these elements, as well as certain registration statements and other SEC filing forms. The amendments will come into force on November 9, 2020. This article describes the significant changes made by the changes and the steps listed companies may wish to take to prepare for the new disclosure requirements. (3) Administrative or judicial proceedings (including proceedings that raise substantially the same issues) arising from federal, state or local regulations adopted to regulate the release of substances into the environment or primarily to protect the environment. Such proceedings are not considered „routine ordinary business disputes“ and should be described if: As currently drafted, Section 103 requires disclosure of material elements of the Company during legal proceedings. Such proceedings expressly exclude the disclosure of the Crown`s environmental proceedings with monetary penalties that the Corporation has reasonable grounds to believe will be less than $100,000. (b) No information is required for proceedings under this section: DISCLAIMER: Due to the generality of this update, the information contained in this document may not be applicable in all situations and should not be implemented without specific legal advice based on certain situations. The amendment at this point adds a provision that expressly allows companies to include information on procedures elsewhere via a hyperlink in the submission.

Some companies already do this, but the change makes it explicitly allowed. The amendment also increases the threshold for Crown environmental litigation from $100,000 to $300,000, or a higher threshold that the Corporation reasonably believes will result in the disclosure of ongoing documents relating to its operations or financial condition. However, this alternative threshold may in no case be higher than $1 million. The amendments relating to the disclosure of business information contained two useful updates regarding the disclosure of legal proceedings. While the requirement in Section 103 of Regulation S-K to disclose all ongoing legal proceedings, with the exception of routine ordinary litigation related to the Company`s business, has not changed, the amendments to the disclosure of activities expressly allow a company to provide the information required under section 103 by hyperlink or reference to disclosure elsewhere in the document. This approach confirms a common practice of many companies to refer to duplicate or similar information in notes to financial statements. In recent months, the SEC has placed considerable emphasis on climate-related disclosures. While the SEC`s proposed rule-making is still work in progress, all important information about how climate change could affect a company`s business should be included in its Form 10-K. Companies should consider their existing climate-related information in light of the 2010 SEC guidelines on climate change disclosure, as well as Corp Fin`s recent commentary on corporate climate change disclosure.

A summary of recent SEC comments can be found in our previous customer advisory „SEC Issues Sample Comment Letter as it Ramps Up Scrutiny of Climate Disclosures“. Given this increased focus, companies should proactively confirm whether additional climate change information is critical to their business and consider their risk factors, business descriptions, lawsuits and MD&A when assessing their climate disclosures. See the „Environment“ discussion in „Risk Factors: What to Include“ below. The second update of item 103 raised the threshold for disclosure of state environmental procedures. Previously, companies were required to disclose environmental procedures that included potential monetary penalties of $100,000 or more. This threshold has been increased to $300,000 adjusted for inflation. However, consistent with its principles-based approach to disclosure by business unit, the amendments to activity disclosure recognize that a clear line threshold may not indicate materiality on a business-specific basis and therefore allow an entity to set a different disclosure threshold of up to $1 million (or, if lower, one per cent of the company`s working capital). Interpretive guidance may be required to confirm whether disclosure of this alternative threshold for environmental procedures should be disclosed, even if the company is not required to report such a process, or only if a proceeding involves penalties exceeding the $300,000 threshold.

Disclosure of the dollar amount of a materiality threshold set by the company is not currently standard practice. Both Form 10-K and Form 10-Q require disclosure of item 103. To prepare for the change, companies need to review their current information and can add cross-references of internal hyperlinks in the submission if necessary. In addition, they should consider whether currently disclosed environmental practices could be omitted under the new rules. Point 3 „Legal Proceedings“ requires the Company to contain information about significant ongoing disputes or other legal proceedings that are not ordinary disputes. 2. Any significant proceeding by which a director, officer or affiliate of the registrant, a registered holder or beneficiary of more than five per cent of a class of voting securities of the registrant or a partner of such a director, officer, affiliate of the registrant or security holder is a detrimental party to the registrant or one of its subsidiaries or to a person has a material interest that is advantageous to the registrant or one of its subsidiaries; The SEC modernized the electronic signature rules for documents filed on EDGAR and allowed public companies to eliminate the need for „wet“ signatures on filed documents. Public companies must obtain and maintain a manually signed certification form from each signatory confirming that their electronic signature is the legal equivalent of their manual signature. Public companies can then use electronic signatures for documents both internally and for filing on EDGAR, provided that the process: (4) confirms compliance with previously amended requirements:15 In addition to the rule changes described above that affect the MD&A, companies will be reminded of the 2020 rule changes in the commercial and judicial proceedings sections. that came into effect in November 2020 and were therefore already required in the companies` most recent Form 10-K.