If so and the company does not, what is the penalty/remedy to shareholders?
It must list material litigation which is not necessarily all litigation. The effective rights of shareholders are "very little" given the costs and the unequal legal forces which will be brought into play.
The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.
I agree with Attorney Doland:
Publicly-help companies are obligated to report material matters, not every matter.
This information does not constitute legal advice and does not establish an attorney-client relationship.
SEC Reporting Companies, which would include all stocks trading on the NASDAQ and NYSE and OTC Bulletin Board (OTCBB) are required to detail pending material litigation and government inquiries in their annual 10-K filings and to provide updates on material developments in their quarterly 10-Q filings.
Depending on the event, it may also be prudent for public companies to issue an 8-K to provide real time "current information" regarding pending litigation even though there is no specific requirement to do so.
Non Reporting Companies, such as those trading on the OTCMarkets Pink Sheets are not obligated to file the 10-Q, 10-K or 8-K, but OTCMarkets requires the disclosure of material litigation in a Company's Information and Disclosure Statement, which must be filed on an annual basis.
As a practical matter, public companies which fail to report material litigation can incur SEC penalties, but often they will amend their filings to include the missing information after receiving a letter. There is no penalty for non-reporting of litigation that is ordinary, routine or incidental to the business.