# Understanding Schedule 13D: Filing Process & Key Requirements

## What Is Schedule 13D?

Schedule 13D is a critical [SEC](https://www.investopedia.com/terms/s/sec.asp) filing required within 10 days of acquiring more than 5% of a company's voting shares. This form, also known as a "beneficial ownership report," provides transparency by disclosing significant ownership stakes. It ensures that markets and other shareholders are informed about potential changes in control, such as mergers or hostile takeovers. By understanding the requirements and purpose of Schedule 13D, investors can better navigate ownership changes in public companies.

### Key Takeaways

*   Schedule 13D is a form filed with the SEC when someone acquires more than 5% of a company's voting shares.
*   Filing Schedule 13D is necessary for transparency, informing the public about significant ownership stakes and potential changes in control.
*   The form must be submitted within 10 days of acquiring a 5% stake and must be amended if the stake changes by 1% or more.
*   Information required includes the identity of the buyer, the source of funds, the purchase purpose, and any involved agreements.

##  How Schedule 13D Impacts Shareholders

Investors may decide to buy a large number of shares in a publicly-held company for a variety of reasons. For example, they could be [activist investors](https://www.investopedia.com/terms/a/activist-investor.asp) attempting a hostile takeover, institutional investors who believe the stock is undervalued, or a dissident shareholder contemplating a [proxy contest](https://www.investopedia.com/terms/p/proxyfight.asp) with the goal of replacing management.

When a person or group of persons acquire a significant ownership stake in a company, characterized as more than 5% of a voting [class](https://www.investopedia.com/terms/c/class.asp) of its publicly traded securities, the SEC requires that they disclose the purchase on a Schedule 13D form. In some cases, they may be able to use a simpler form, called the [Schedule 13G](https://www.investopedia.com/terms/s/schedule13g.asp).

Once the disclosure has been filed with the SEC, the public company and the exchange(s) on which the company trades are notified of the new [beneficial owner](https://www.investopedia.com/terms/b/beneficialowner.asp). Schedule 13D informs the public about who the new shareholders are and why they bought a significant stake in the company. The form signals that a change of control, like a hostile takeover or proxy fight, might happen, allowing current shareholders to make informed decisions.

The obligation to file Schedule 13D lies with the new beneficial owner. This is because the [target company](https://www.investopedia.com/terms/t/targetfirm.asp) might not know the person or group behind the transaction. The beneficial owner must file Schedule 13D within 10 days following the purchase of the shares.

## Key Requirements of Schedule 13D Filing

Schedule 13D requires beneficial owners to provide detailed information on certain items, including:

**Item 1: Security and Issuer.** This section asks about the type of securities purchased and the name and address of the company that issued them.

**Item 2: Identity and Background.** In this section, the buyers identify themselves, including their type of business, citizenship, and any criminal convictions or involvement in civil suits within the past five years.

**Item 3: Source and Amount of Funds or Other Considerations.** This section notes where the money is coming from, including whether any of it was borrowed.

**Item 4: Purpose of Transaction.** This section of Schedule 13D alerts investors to any change of control that might be looming. Among other disclosures, beneficial owners must indicate whether they have plans involving a merger, reorganization, or liquidation of the issuer or any of its subsidiaries.

**Item 5: Interest in Securities of the Issuer.** Here the beneficial owner lists the number of shares being purchased and the percentage of the company's [outstanding shares](https://www.investopedia.com/terms/o/outstandingshares.asp) that this purchase represents.

**Item 6: Contracts, Arrangements, Understandings, or Relationships with Respect to Securities of the Issuer.** The beneficial owner should describe any agreement or relationship they have with any person regarding the target company’s securities. For example, that might involve voting rights, finder's fees, joint ventures, or loans or option arrangements.

**Item 7: Material to be Filed as Exhibits.** This includes copies of written agreements the beneficial owner has about the securities.

## When to Amend Schedule 13D: Material Changes Explained

If there are any material changes to the information filed in Schedule 13D, the beneficial owners must amend their Schedule 13D within two days. A material change includes any increase or decrease of at least 1% in the percentage of the class of securities held by the beneficial owner.

Most Schedule 13D filings can be viewed in the SEC's [EDGAR database](https://www.investopedia.com/terms/e/edgar.asp). The database presents Form 13D as “SC 13D–General statement of acquisition of beneficial ownership.” Any amended form is denoted as SC 13D/A.

## Real-World Example: IAC's Acquisition of MGM Shares With Schedule 13D

The media conglomerate IAC/InterActiveCorp ([IAC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=IAC)), purchased a significant amount of equity shares in MGM Resorts International ([MGM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=mgm)). The resulting 13D was filed on August 20, 2020, with the SEC.

Below is a portion of the 13D filing for MGM:

*   IAC/InterActiveCorp is named as the reporting person (section 1).
*   The number of shares purchased was 59,033,902 (section 7).
*   The purchase represented a 12% ownership in MGM, based on the outstanding shares at the time (section 13).

### Title Page for the 13D Filing:

![MGM Resorts International 13D Filing Example](https://www.investopedia.com/thmb/07jLex4UYvegwhceLebzXTyQx8M=/1202x0/filters:no_upscale():max_bytes(150000):strip_icc()/13DMGM1-aee26459dcdd44df809decca5ddb72bb.jpg)

*MGM Resorts International 13D Filing Example.*

### Details from the 13D Filing

![Example of 13D Filing from MGM Resorts International.](https://www.investopedia.com/thmb/Rfl7KngfBkU1KpdHEGZe6JSO3xA=/1202x0/filters:no_upscale():max_bytes(150000):strip_icc()/13Dsharpened-5ede75f446634718aff2c3a063df6c39.jpg)

*Example of 13D Filing from MGM Resorts International.*

## The Bottom Line

Schedule 13D is a vital form required by the SEC when investors acquire more than 5% of a company's voting shares, providing transparency and revealing potential changes in company control. Investors must file this form within 10 days of acquiring significant ownership and update it for any material changes.

Understanding the details and requirements of Schedule 13D can aid investors, the company, and the public in making informed financial decisions. The IAC/InterActiveCorp example illustrates the importance of this disclosure in understanding ownership stakes.  

> **Article Sources**
>
> 1.  U.S. Securities and Exchange Commission. "[Schedule 13D](https://www.sec.gov/fast-answers/answerssched13htm.html)."
>     
> 2.  SEC Edgar Filing. "[MGM Resorts International](https://www.sec.gov/cgi-bin/browse-edgar?CIK=789570)."