What is the Risks section on the Legal page and what should I include?
The Risks section is meant to include Risk Factor Disclosures specific to the company, and serves two major purposes:
- It informs investors of the various risks that the company faces, allowing them to make a more informed investment decision.
- It allows companies to mitigate the risk of liability to shareholders in the event that any of these material risks come to pass.
- It acts as a defense in the event of shareholder litigation.
In consideration of these two goals, we strongly suggest that companies make this section as comprehensive and specific as possible. The sample risk factors located here (prepared by a law firm) are an excellent reference.
We strongly advise companies to brainstorm any risks that they foresee having strong potential for litigation in the future and disclosing them to investors now. These should include risks specific to the company, product, and industry, and be as detailed as possible.
This way investors get the most accurate and complete picture of their investment possible, and companies can prove that these risks were disclosed to investors in the event that any of these material risks should ever come to pass.