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Disclosure obligations for a director resignation: a review of the reporting requirements, and recommendations for ensuring compliance.

COMPANIES SHOULD BE AWARE of the disclosure obligations triggered by the resignation of a director. While these obligations may seem straightforward, companies should implement safeguards to ensure compliance with disclosure requirements, especially in situations where the timing of a resignation is ambiguous.

SEC reporting requirements

Under Item 502(b) of Form 8-K Form 8-K

The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock.


Form 8-K

See 8-K.
, if a director resigns from or refuses to stand for re-election to the board, a company must disclose that the event has occurred in a Form 8-K filed within four business days of the triggering event Triggering Event

A certain milestone or event that a participant in a qualified plan must experience in order to be eligible to receive a distribution from a qualified plan.
. If the director furnished the company with any written correspondence concerning his or her resignation, the company must file a copy of the correspondence with the Form 8-K. Further, if a director resigns or refuses to stand for re-election because of a disagreement with management, the company must disclose the event date, the committee positions held by the director and the circumstances surrounding the event.

Determination of whether a director has given a notice of a decision to resign is a facts and stances test. While a disclosure obligation clearly arises when a director gives an unambiguous notice of resignation either immediately or at a specific future date, questions arise where a resignation is ambiguous, conditional or is "springing" upon the occurrence of certain events. SEC guidance states that notice of a "decision to resign" triggers a Form 8-K reporting obligation, regardless of whether the notice is written, conditional, or subject to acceptance. Mere "discussions or consideration" related to a resignation do not trigger a Form 8-K reporting obligation. Further, "springing resignation" requirements, including resignation requirements upon failure to receive a majority vote or upon a change in principal employment, raise questions about the timing of a resignation. In these cases, SEC guidance provides that disclosure is not triggered upon a director submitting an irrevocable Unable to cancel or recall; that which is unalterable or irreversible.


IRREVOCABLE. That which cannot be revoked.
     2. A will may at all times be revoked by the same person who made it, he having a disposing mind; but the moment the testator is
 letter of resignation conditioned upon the director receiving a majority of votes, but that it is triggered by the board's decision to accept the resignation.

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Questions about the timing of a resignation may also arise when a director indicates her intention to complete her current term but not seek re-election for a subsequent term. In this case, a company must consider whether the board has had parallel conversations about the desire to re-elect the director, as disclosure is not required if a director is not slated for re-election to the board.

NYSE NYSE

See: New York Stock Exchange
 reporting requirements

Any change to the directors of a NYSE-listed company requires a company to provide "prompt notice" of such change to the NYSE, which can generally be accomplished via an email to the appropriate NYSE contact. A company must also submit a Section 303A Interim Written Affirmation upon a director's departure from the board or change in composition of any key standing committee. Companies should also consider whether the director's resignation is a material event that should be disclosed via press release.

Nasdaq reporting requirements

Nasdaq-listed companies do not have a general obligation to notify Nasdaq upon a director resignation. Nasdaq rules do, however, require a company to notify Nasdaq if the company becomes aware of any noncompliance with its corporate governance Corporate Governance

The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law.
 requirements. Accordingly, if a director resignation results in non-compliance with the majority independent board or committee composition requirements, prompt notification is required. Similar to the NYSE-listed company considerations, Nasdaq-listed companies should also consider whether the resignation is a material event to be disclosed via press release.

Recommendations

To facilitate compliance with these disclosure requirements and to ensure appropriate disclosure controls and procedures, companies should consider the adoption of a director resignation policy. A resignation policy may be short and merely require a director to tender a resignation to a specific person such a corporate secretary or similarly situated similarly situated adj. with the same problems and circumstances, referring to the people represented by a plaintiff in a "class action," brought for the benefit of the party filing the suit as well as all those "similarly situated.  employee who is familiar with these disclosure requirements. The policy may address whether the resignation should be in writing, keeping in mind that a written resignation must be filed with the Form 8-K. A resignation policy need not be incorporated into a company's corporate governance guidelines; if it is, then the policy will become, at least for NYSE-listed companies, publicly available.

Even if a company does not implement a formal director resignation policy, officers and directors should be advised of the disclosure requirements triggered by a director's statement, whether written or oral, of an intent to resign. Further, an individual with notice of a director's intent to resign should promptly notify key board members, the management team, and the individual(s) responsible for SEC filings to ensure appropriate disclosure is considered and ultimately made.

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Dear Independent Directors:

This is to confirm that I have resigned from the Board of Directors of Chiquita Brands International, effective Immediately.

The Company faces declining revenues, deteriorating profits, and a severe drop in its stock price. I have lost the confidence that we have the strategies and plans that can reverse this situation. Chiquita also lacks the capabilities to address basic operational requirements (programming) operational requirements - Qualitative and quantitative parameters that specify the desired capabilities of a system and serve as a basis for determining the operational effectiveness and suitability of a system prior to deployment.  for a sound business.

The fact that Management did not want or could not respond to a request for a realistic 2011 forecast six weeks prior to the start of the new fiscal year is simply one such illustration.

I have enjoyed interacting with each of you, and have the greatest respect for your dedication to the interest of Chiquita and its stakeholders Stakeholders

All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government.
.

--Durk

The authors can be contacted at jlochmann@foley fo·ley  
n.
1. A technical process by which sounds are created or altered for use in a film, video, or other electronically produced work.

2. A person who creates or alters sounds using this process.
.com and tparramore@foley.com.

RELATED ARTICLE: Dear Directors ... I'm out of here

Ed. Note: A resignation Dr letter that gained notoriety NOTORIETY, evidence. That which is generally known.
     2. This notoriety is of fact or of law. In general, the notoriety of a fact is not sufficient to found a judgment or to rely on its truth; 1 Ohio Rep.
 is the one sent by Durk Jager when he leftly the board of Chiquita Brands International. Jager, a former CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board.  of Procter & Gamble Co., sent the letter by email, dated Nov. 19, 2010, which the company disclosed in a securities filing later that month. The text is reproduced here.

Jessica Lochmann Allen is a partner and G. Tyler Parramore is an associate in the Transactional & Securities practice of Foley & Lardner LLP's business law department (www.foley.com).
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Title Annotation:BOARD PRACTICES
Author:Allen, Jessica Lochmann; Parramore, G. Tyler
Publication:Directors & Boards
Date:Dec 22, 2012
Words:991
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