Reports (also known as Annual Reports to Shareholders, or "Glossy" Annual Reports) are sent to shareholders each year and contain descriptive and financial information about the state of the company.
Reports to the Board and Shareholders :-
An essential element in the implicit agreement between a company and an investor is that the investor will receive regular, meaningful information on how the company they invested in is progressing.
For public companies, the securities regulators impose very rigid obligations on CEOs, CFO's and boards to keep investors updated with full, plain and true disclosure. Failures to disclose accurately or in a timely manner can result in severe personal liabilities for all directors and officers.
In private companies, there are far fewer regulatory requirements on officers and directors to disclose and rapidly disseminate information. But most shareholders are just as interested in how the company is doing.
For the company, the biggest benefit of keeping investors informed is to help motivate them to contribute to future rounds of financing. Almost every successful company needs more capital at some point. The best place to start to find addition capital is amongst existing shareholders. Prospective shareholders will also very often ask existing shareholders about their experiences with a company while they are working through their decision process.
Good reporting goes even beyond the CEO and CFO's current company. It is an important element in their personal reputations that they will carry forward into their future.
There is some overlap in the information that the management team sends to the board and to all of the shareholders. There are no hard rules about how much information should go to shareholders. It depends a lot on the stage of the company and how interested the shareholders are. The best rule is that if you are in doubt, send it out. Its far better to over communicate than under communicate.
For public companies, the securities regulators impose very rigid obligations on CEOs, CFO's and boards to keep investors updated with full, plain and true disclosure. Failures to disclose accurately or in a timely manner can result in severe personal liabilities for all directors and officers.
In private companies, there are far fewer regulatory requirements on officers and directors to disclose and rapidly disseminate information. But most shareholders are just as interested in how the company is doing.
For the company, the biggest benefit of keeping investors informed is to help motivate them to contribute to future rounds of financing. Almost every successful company needs more capital at some point. The best place to start to find addition capital is amongst existing shareholders. Prospective shareholders will also very often ask existing shareholders about their experiences with a company while they are working through their decision process.
Good reporting goes even beyond the CEO and CFO's current company. It is an important element in their personal reputations that they will carry forward into their future.
There is some overlap in the information that the management team sends to the board and to all of the shareholders. There are no hard rules about how much information should go to shareholders. It depends a lot on the stage of the company and how interested the shareholders are. The best rule is that if you are in doubt, send it out. Its far better to over communicate than under communicate.
Sending Reports to Shareholders :-
In the 20th century, companies used snail mail, and then fax, to communicate with shareholders. Today, all tech companies and most other modern companies exclusively use html e-mail and the web. How you communicate also tells people a lot about you and your company. If you send a poorly formatted e-mail, its as bad as using incorrect grammar or spelling. We have high expectations of the information people push into our inboxes.
Investor Confirmations :-
Investors should receive a complete package confirming their investment and welcoming them as shareholders promptly after sending in their subscription check.
CEO Updates to Shareholders :-
Every private company CEO should e-mail an update to shareholders monthly.
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