A company might even lose its ability to do business as a result of failure to become Y2K compliant. Companies must consider the effect of Y2K preparedness on their financial statements. Independent auditors, whose opinions endorse a company's financial statements, are required by federal regulations and professional standards to account for many factors that contribute to a company's overall well-being. The potential consequences of Y2K non-compliance may fall within some reporting requirements. Indeed, even now, some stock analysts are looking at whether companies are taking corrective measures.
Similar concerns exist in the area of securities disclosure requirements.
Again, the materiality of the consequences of Y2K non-compliance may require a company to report its lack of preparedness on registration forms associated with any securities issue and on required annual and quarterly statements. Directors and officers should consider their own potential exposure as signatories to securities registration forms and other documents concerning which there is the possibility of material misstatement through omission, etc. Directors should further be concerned about the possibility of post-2000 shareholder derivative suits if nothing is done to correct the problem now. Given growing awareness of the problem and its potentially disastrous consequences, it is unlikely that a board could claim it was reasonably ignorant. Finally, banks may soon be reviewing their exposure to debtors with serious Y2K compliance problems, because bank examiners will be reviewing bank loan portfolios to determine what allowances have been made for the consequences of debtors' non-compliance.