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“Maybe if documents are clearly drafted with their intended audience in mind, the Delaware courts will review fewer of them.”
Isaac Hunt, Jr., former SEC Commissioner, February 6, 1997
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DISCLOSURE DRAFTING TIPS
Welcome to my disclosure drafting tips! I hope to use this page to highlight some common errors that I find as I read annual reports, proxy statements, Forms ADV (or is that Form ADVs?), and other disclosure documents. The names have been changed to protect the innocent, but I promise: every “before” that you see here is real.
Please check back often. I will add a new tip every week or two. If your company has any particularly gnarly disclosure paragraphs that you want me to tackle, please send them along!
Tip: Weasel words, double negatives, and the kitchen sink; oh my!
Before
The Company is a large multinational corporation with operations in the United States and international jurisdictions. As such, the Company is subject to the tax laws and regulations of the U.S. federal, state and local governments and of many international jurisdictions. From time to time, various legislative initiatives may be proposed that could adversely affect the Company’s tax positions. There can be no assurance that the Company’s effective tax rate or tax payments will not be adversely affected by these initiatives. In addition, U.S. federal, state and local, as well as international, tax laws and regulations are extremely complex and subject to varying interpretations. There can be no assurance that the Company’s tax positions will not be challenged by relevant tax authorities or that the Company would be successful in any such challenge.
[133 words]
Before, with commentary
The Company is a large multinational corporation with operations in the United States and international jurisdictions. As such, the Company is subject to the tax laws and regulations of the [this is an unnecessary kitchen sink approach]. From time to time, various legislative initiatives may be proposed that could adversely affect the Company’s tax positions. [double negatives and weasel words] by these initiatives. In addition, [more kitchen sink] are extremely complex and subject to varying interpretations. [more double negatives and weasel words] by relevant tax authorities or that the Company would be successful in any such challenge.
After
XYZ Corp. is a large multinational corporation with operations in the United States and many foreign countries. As a result, we are subject to the tax laws and regulations of many jurisdictions. From time to time, legislative initiatives are proposed that could adversely affect XYZ’s tax positions, effective tax rate, or tax payments. Under the best of circumstances, tax laws and regulations are extremely complex and subject to varying interpretations. It is always possible that XYZ’s tax positions will be challenged by relevant tax authorities; we may not be successful at defending any such challenge.
[95 words]
Tip Archive
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