Implications of losing FPI status

by Feb 7, 2023Being Public in the US, IPO

If you are an EMEA company contemplating a US IPO, or even as an already public company in the US, you may face the uncomfortable situation that your business growth & strategy causes you to lose your foreign private issuer (FPI) status. It’s important to stay ahead of any red flags 🚩 here, as this can cause a transformation in your accounting & reporting.

What does it mean if you are about to lose your FPI status? Find out more below 👇

If you are new to the US IPO accounting lingo, an FPI an SEC registrant status afforded certain exemptions based on the fact that the company is incorporated under foreign laws, EXCEPT IF:

1️⃣ >50% of voting shares are held by US residents; OR

2️⃣ either the majority of exec directors/officers are US citizens/residents OR >50% assets are located in the US; OR

3️⃣ the business is administered primarily in the US

There may be a fine line here, if you are on the cusp of tripping one of these tests, such as growing the business in the US and bringing in more US directors or acquiring more US assets.

‼ It’s important to monitor this before going public, as well as annually (officially required to be performed as of Q2 of your fiscal year).


  1. US GAAP reporting – If you lose FPI status, you need to file reports under US GAAP. This conversion from IFRS or local GAAP can be a costly & time-intensive exercise, not only to qualitatively & quantitatively assess & book adjustments, but to revamp workbooks and ensure staff has appropriate knowledge. Do you have the processes and the resources in place for this transition? Are you ready also to present your FS in US$ as opposed to local currency?
  2. Quarterly reporting – As an FPI, you would have been exempt from quarterly reporting under 10-Qs. This will now be required. Do you have the appropriate processes in place to do a more thorough quarterly close? Can you build out interim condensed financial statements easily? Are you ready for the cost & time required for auditors to review the quarterly statements?
  3. General SEC reporting – Annual reports need to be filed on 10-Ks instead of 20-Fs. This means not only tighter deadlines on annual reports (and audits), but also increased disclosure requirements both from a FS perspective and elsewhere in the document. You will also need to file current reports on 8-Ks for certain significant requests. Does your team have the capacity to absorb these increased requirements?
  4. Increased SOX requirements – By the way, reporting quarterly means you also need to certify ICFR and DCPs quarterly instead of annually. Do you have processes in place to monitor this? A lot of FPIs are also EGCs which afford exemptions around attestation of ICFRs, but that is a topic for another day!
  5. Corporate governance – While FPIs can follow home country governance, losing this status means you need to adopt those policies of either NYSE or NASDAQ. Have you conferred with internal & external counsel about what this means? You may need additional independent directors or committees, and will need additional executive compensation disclosures.

If you are wondering if you meet these criteria, it’s best to consult with a lawyer. If you are about to lose your FPI status, it’s best to consult with a cross-border accounting expert to help you project manage this accounting & reporting transition! 😉

Katrina Nacci

Katrina Nacci


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