April 15, 2025

New Corp Fin CDIs on Clawbacks and De-SPAC Co-Registrants

Mayer Brown Free Writings + Perspectives

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Mayer Brown Free Writings + Perspectives

On April 11, 2025, the staff (the “Staff”) of the U.S. Securities Commission’s Division of Corporation Finance (the “Division”) issued seven new Compliance and Disclosure Interpretations (“CDIs”), the third update to the CDIs by the Division in the last few months. Six new Exchange Act Forms CDIs relate to the clawbacks-related checkboxes on the cover pages of Exchange Act annual reports, as well as the disclosure required by Regulation S-K Item 402(w)(2), while the remaining new CDI, included in the Exchange Act Rules CDIs, addresses co-registrant target companies in de-SPAC transactions.

Exchange Act Forms Updates

CDI	Staff Guidance
104.20	When an issuer revises financial statements in annual report to correct an error to previously issued financial statements, it must check the box on the cover page of its annual report disclosing that “the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.” This applies whether a “little r” restatement or “big R” Restatement is required for any reason.[1] However, when an issuer corrects an immaterial prior period error that is recorded in the current period? (an “out-of-period adjustment”), the issuer does not need to check the box because previously issued financial statements are not being revised.
104.21	When an issuer prepares a “Big R” restatement to its prior year financial statements and amends the relevant annual report, it must also analyze whether erroneously awarded executive compensation should be recovered.[2] Even if the issuer determines that no compensation is subject to “clawback,” it must still check the box on the cover page of the amended annual report stating that the restatement “required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period” and provide an explanation. This includes when (i) executive officers did not receive any incentive-based compensation during the relevant time frame or (ii) incentive-based compensation received was not based on a financial reporting measure impacted by the restatement.
104.22	When an issuer reports a “Big R” restatement to its prior year financial statements, amends the relevant annual report, and checks the “clawback” box (discussed in CDI 104.21 above) on the cover of its amended annual report, it does not need to also check the box on its current annual report, even though the amended financial statements will be included, assuming no further restatements. However, the company’s current proxy or information statement, as applicable, that includes executive compensation disclosure regarding the prior period must include the disclosure required by Item 402(w)(2) of Regulation S-K (or Form 20-F or 40-F as applicable), dealing recovery of erroneously awarded compensation.
104.23	In the current year, before filing its prior year annual report, an issuer prepares a “little r” restatement of its previously issued annual financial statements and determines that no recovery of erroneously awarded compensation is required. If the issuer checks the relevant boxes on its prior year’s annual report, filed in the current year, and provides the disclosure required by Item 402(w)(2) (or Form 20-F or 40-F, as applicable) in the current year proxy or information statement, the issuer does not need to provide the disclosure required by Item 402(w)(2) again in the subsequent year’s annual report, proxy or information statement.
104.24	If an issuer initially reports a restatement of its annual financial statements on a form that does not have a cover page check box indicating that the financial statements included reflect the correction of an error to previously issued financial statements,[3] the company must check the box on the cover page of its next annual report, assuming it includes the relevant annual financial statements.
104.25	If, in the fourth quarter of its fiscal year, an issuer determines it must prepare restatements for quarters 1-3 of that year, the issuer does not need to check any boxes on the cover page of that year’s annual report, even if it includes disclosure about the interim restatements in a footnote to its annual financial statements. However, the issuer must provide disclosure pursuant to Item 402(w) of Regulation S-K in its annual report, proxy or information statement, as applicable, because, for purposes of that disclosure, an accounting restatement includes an accounting restatement that impacts interim periods only.

Exchange Act Reporting Following a de-SPAC Transaction

New Exchange Act Rules CDI 253.03 is based on the premise that, following a de-SPAC transaction in which the target company is included as a co-registrant on the Securities Act registration statement for the de-SPAC transaction, the co-registrant target becomes a reporting company under Section 15(d) of the Exchange Act upon effectiveness of the registration statement. In this situation, once the de-SPAC transaction has closed, any co-registrant target can file a Form 15 to suspend its Section 15(d) reporting obligations if (i) the co-registrant target is wholly-owned by the combined company and (ii) the co-registrant target remains current in its Section15(d) reporting obligations through the date of filing the Form 15.[4] The new CDI is consistent with guidance in the Commission’s 2024 SPAC rules release, and is confined to situations where the new public company established by the de-SPAC transaction will continue to be publicly reporting, such that disclosure by the target would not be additive to the total mix of information available to investors.

[1] A “Big R” Restatement corrects an error in previously issued financial statements that is material to those financial statements, while a “little r” restatement corrects an error that is immaterial to previously issued financial statements but would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.

[2] See Exchange Act Rule 10D-1(b).

[3] For example, Form 8-K or a Securities Act registration statement.

[4] See Exchange Act Rule 12h-3.

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