Schedule 13D Instructions
Section 13 requires that any person that has acquired, either directly or indirectly, more than 5% of the beneficial ownership of a reporting company’s equity securities to file either a Schedule 13D or 13G within 10 days after the acquisition.
The disclosure statement includes among other things, the identity of the beneficial owners, the amount of beneficial ownership, and plans or proposals regarding the issuer.
For purposes of Section 13, beneficial ownership includes the right to acquire securities within 60 days of the reporting date. So a shareholder that owns convertible notes, warrant or option that give them the right to acquire securities within 60 days must include those securities in the calculation of beneficial ownership. If the right to acquire securities is pre-conditioned on an event (such as a transaction closing) that has not occurred, or contractually limited (such as a provision limiting the acquisition right to no more than 4.9% of outstanding securities), the right to acquire such securities is likewise limited as is the concurrent ownership reporting obligation.
Amendments to a 13D must be filed if there is a change of 1% or more from the ownership last reported – including increases or decreases. If the number of shares that a convertible note holder owns changes by 1% or more due to fluctuations in a conversion price that is tied to market price, each such 1% change requires the filing of an amended Schedule 13D. Also any material changes in a previously filed Schedule 13D require an amendment to such filing, even if that material change is not in beneficial ownership. For instance, an amendment would need to be filed if the shareholder’s plans to purchase additional securities, or material contracts with the company, change since the last report.
The requirement to file amendments to a previously filed Schedule 13D continues until such filer has reported ownership below 5%. Accordingly, if a change of beneficial ownership results in ownership below 5%, but such change is not a 1% change that would otherwise trigger the requirement to file an amendment, that shareholder can voluntarily file such an amendment to relieve themselves of the Schedule 13D filing requirement going forward (or at least until a new triggering event required such filing in the future).