Question

My company is a private limited liability company. My shareholders are happy with the performance of my company. They receive dividends twice a year. The financial statements of the company are disclosed to them. The stocks/shares are traded privately; they are not traded on any stock exchange. However, I received notice from the SEC stating that the company has 30 days to file several documents with the SEC. I already sent data to the Registrar of Companies and I understand why that is necessary but why must I disclose anything to the SEC when my company is a private company?

Please discuss 3 reasons why a private company must also make disclosures to the SEC. Give reasons for your opinion/response.

Answer 1

The three reasons why a private company must also make disclosures to the SEC are as follows:

- when it wants to convert into a publicly owned company and float in new securities it must submit reports to the SEC for complying with the registration requirements.

- when it has common shareholders of 500 of more which means that it acquired outside ownership equal to public companies.

- when its assets are of $10 million or more which also means that it has reached the size of public company.