Principal shareholder is any shareholder who directly or indirectly owns or controls 10% or more interest of a public company’s outstanding voting securities. Principal shareholders, along with ofi cers and directors, are considered company insiders.
Insiders are required by the U.S. Securities and Exchange Commission (SEC) to report all beneficial ownership of and transactions in their company’s securities pursuant to Securities Exchange Act of 1934 (1934 Act) insider trading rules.
Insider trading rules require insiders such as principal shareholders to file with the SEC, the company and any applicable self-regulatory organization a disclosure statement pursuant to Section 16 of the 1934 Act on Form 3, Form 4, or Form 5. Principal shareholders file Form 3 after first becoming a 10% or more holder, and file the monthly Form 4 or annual Form 5 after a change in beneficial ownership has occurred.
Insider trading rules also require insiders such as principal shareholders to file with the SEC, the company, and any applicable self-regulatory organization a disclosure statement detailing the security transactions pursuant to Section 13(d) of the 1934 Act on Schedule 13D or Schedule 13G.
Schedule 13D is required upon becoming a 10% or more owner unless the principal shareholder is a passive investor, is eligible, and elects the simpler Schedule 13G. Amendments to Schedule 13D or Schedule 13G are required to be filed upon a material increase or decrease in the number of voting securities owned.