As you prepare SEC disclosure filings, remember to ask if a company executive benefits when your company charters a plane.
In March, 2023, the SEC issued a press release about settling charges with a company and its executive for failure to disclose compensation the executive received from the company’s charter of the executive’s private plane for travel by company executives. The SEC’s reminder was “Public companies are required to disclose their executives’ financial interest in the companies’ transactions”.
If the executive’s LLC owns the aircraft and leases it to an FAA Part 135 Operator to be chartered, the SEC wants to know the charter revenue that is paid to the executive’s LLC.
If the executive’s LLC receives 85% of the charter revenue, it pays the operating costs and the net balance to the executive’s LLC is generally a small percentage of the charter revenue that is paid to the executive’s LLC.
SEC reporting companies should question the executives to determine if the company must disclose an executives’ financial interest in the company’s aircraft charter transactions or other aircraft-related transactions.
Michelle M. Wade is a partner with the law firm of Jetstream Aviation Law and counsels clients on the acquisition, financing and operation of corporate jets operated under Part 91 and Part 135 of the Federal Aviation Regulations. Jetstream Aviation Law can be found at www.JetstreamLaw.com.
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.