The Advisors' Blog

– Broc Romanek

Some of us have been internally debating what the “latest practicable date” means for purposes of S-4 compensation disclosures. There often are public-public deals with S-4 filings that are updated and amended four or five times before going effective six months after the S-4 is first filed with the SEC. In these S-4s, they start describing all the compensation arrangements as they are back at signing – but six months later, the company is still using some date that is quite a bit earlier (or, in some cases, a future date that is expected to be the closing) to show compensation “as of the latest practicable date.”

Here are various thoughts from folks that I reached out to:

– For a long time, I’ve trying to connect the dots of “latest practicable date” and compensation disclosures and S-4. I can’t find anywhere in S-4 itself that references “latest practicable date” and I only found a few references of it in Item 402 of Regulation S-K – (1) with respect to not being able to calculate salary or bonus and so you would provide it in a Form 8-K, and (2) with respect to golden parachute compensation. I don’t think item (1) would apply for an S-4 as an issuer would theoretically already have get this squared away for its 10-K. As such, I assume we are referring to calculating golden parachute payments where we pick a triggering date as of the latest practicable date and that the payment is based on a price that is not yet determined (such as a stock price).

– My personal approach to “latest practicable date” (a similar term is used in Item 403 for stock ownership tables – “most recent practicable date”) is to update the information so that by the time the registration statement is declared effective, it provides substantively materially accurate information within a reasonable period of time. In other words, as always said by the SEC, “it depends on the facts and circumstances” and don’t make any material misstatement or omissions. My goal would be to set up a calculation so that you can plug in the variable for the answer. This means your comp information could be within 1-3 weeks of going effective (based on filing and amendment and then getting SEC sign-off). If it makes sense, you could also use a variable approach showing payments at different levels based on different assumptions (e.g., high/medium/low).

Generally, executive comp tables must include the last completed fiscal year. Consider CDI Regulation S-K, Ques. 117.05 with regards to updating comp tables in an S-1 or an S-3. Also make sure you are comfortable that there are no material misstatements or omissions. I would also consider providing updates to the extent that there have been changes made in disclosures pursuant the acquisition agreement (e.g., in the disclosure schedules).

– Our view is that (leaving aside how material the volume of comp data really is), we would go with less is more so would leave it until there’s a specific rule or comment to change it. If there’s no SEC comment, we think a lot of S-4 issuers leave well enough alone, so they don’t have to take another cut at comp beyond once for S-4 purposes. Even if perhaps “latest practicable date” means that comp really should be updated to final, that’s easier said than done and sometimes impacts the type of prospectus that can be used and seems more trouble than it’s worth (not to mention the legal costs)).

– If the deal straddles two fiscal years, and forward incorporation by reference is not available, I would probably advise the registrant to roll forward when new annual numbers become available. Otherwise I’ve never thought of the executive compensation tables as ones that had to be updated more frequently than that.

– In most other contexts where “latest practicable date” or “recent practicable date” is used, I’ve had the Corp Fin Staff comment if it wasn’t in the last month or two. I would think the other issue, from a shareholder vote perspective (for deals where there is a vote) is making sure the s/h has all the material information they need to make an informed vote.

– I assume this is talking about the golden parachute comp disclosures, in which case it doesn’t seem like the Staff is too focused on those and my hunch is that companies get away with sticking with the initial date used in the first filing. The few deals I’ve been involved in that have included this disclosure haven’t been updated, but none of those were long registration processes. But I bet if you actually asked the Staff, they’d say it should be updated as time passes.