SEC Provides Conditional Relief from Filing SEC Reports for Companies Affected by COVID-19
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On March 4, 2020, the Securities and Exchange Commission (the “SEC”) issued an order1 (the “Order”) providing that, subject to certain conditions, public companies and other persons required to make filings with the SEC, would be given an additional 45 days to file certain Exchange Act reports2 that would otherwise have been due between March 1 and April 30, if they are unable to meet filing deadlines due to COVID-19 related challenges. The SEC intends to monitor the current situation and may, if necessary, extend the time period during which this relief applies, with any additional conditions it deems appropriate and/or issue other relief.
Conditions for Relief from Filing Deadlines
Companies which are unable to meet a filing deadline due to circumstances related to COVID-19 must:
- Furnish to the SEC a Form 8-K (or Form 6-K) by the later of March 16 or original filing deadline of the relevant report stating:
- that it is relying on this Order;
- the reasons why it could not complete such filing on a timely basis;
- the estimated date by which the report, schedule or form is expected to be filed;
- if appropriate, a risk factor explaining, if material, the impact of COVID-19 on its business; and
- if the reason the subject report cannot be timely filed relates to the inability of any person, other than the registrant, to furnish any required opinion, report or certification, the Form 8-K (or Form 6-K) shall attach as an exhibit a statement signed by such person stating the specific reasons why such person is unable to furnish the required opinion, report or certification by the filing deadline.
- File the required report, schedule or form no later than 45 days after the original due date; and
- In the filed report, schedule or form, disclose that it is relying on this Order and state the reasons why it could not file such document on a timely basis.
Individuals seeking relief under the Order must comply with requirements (2) and (3) noted above.
The accompanying press release also discusses the position the SEC staff will take with respect to satisfying the eligibility requirements to use Form S-3 and the Form S-8 eligibility and Rule 144(c) current public information requirements.
Impact on Proxy Statements and Annual Meetings
Furnishing of Proxy and Information Statements
The Order also exempts registrants from the requirements of the Exchange Act and the rules thereunder to furnish proxy statements, annual reports and other soliciting materials, as applicable (“Soliciting Materials”), as well as information statements and annual reports, as applicable (“Information Materials”), if:
- The registrant’s security holder has a mailing address located in an area where, as a result of COVID-19, the common carrier has suspended delivery service of the type or class customarily used by the registrant or other person making the solicitation; and
- The registrant or other person making a solicitation has made a good faith effort to furnish the Soliciting Materials or the Information Materials to the security holder, as required by the applicable rules.
Potential Impact of COVID-19 on Annual Meetings
Companies should also assess the impact COVID-19 might have on their upcoming annual meetings. At least one company has already switched the format of its annual meeting from an in-person to a virtual-only meeting in light of public health concerns regarding COVID-19.3 If a company decides to change the format of its meeting (if state law permits), or the date or location of the annual meeting after its proxy statement has been mailed, consideration must be given to providing the proper notice to shareholders and any filings that must be made with the SEC in connection with such change. In most cases, filing supplemental materials under DEFA14A on a Schedule 14A (by checking the “Definitive Additional Materials” box on the cover page of the Schedule 14A) to change the meeting format or location should suffice, absent other changes or considerations that may require or make it appropriate to re-mail materials to shareholders. Companies that have not yet filed their proxy statements might consider adding information to signal that the meeting location or format could be changed as circumstances dictate in light of current uncertain environment.
Related Disclosure Considerations
While noting that the COVID-19 situation may prevent certain issuers from completing reports within the required timeframe, SEC Chairman Jay Clayton reminded companies “to provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus to the fullest extent practicable to keep investors and markets informed of material developments.”
Specifically, companies are reminded to:
- Work with their audit committees and auditors to ensure that their financial reporting, auditing and review processes are as robust as practicable in light of the circumstances in meeting the applicable requirements. Companies providing forward-looking information in an effort to keep investors informed about material developments, including known trends or uncertainties regarding COVID-19, can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for forward-looking statements;
- Consider their activities in light of their disclosure obligations under the federal securities laws. For example, if a company has become aware of a risk related to COVID-19 that would be material to its investors, it should refrain from engaging in public securities transactions and take steps to prevent directors, officers and relevant corporate insiders from initiating such transactions until investors have been “appropriately informed about the risk”; additional blackout periods may be appropriate for insiders with material nonpublic information;
- Avoid selective disclosures of material information related to the impacts of the coronavirus and take the necessary steps to disseminate any such information broadly. Companies should review existing communications policies to make sure that only designated individuals speak on the company’s behalf;
- Consider whether, depending on a company’s particular circumstances, there may be a need to revisit, refresh or update previous disclosure to the extent that the information becomes materially inaccurate; and
- Consider designating one or more directors to interact regularly with management and keep the board apprised of developments.
Many companies have already included COVID-19 disclosures in the risk factors sections of their Exchange Act Reports, including disclosures related to the impact on operations, production, suppliers and logistics, indirect demand effects, impact on liquidity risk, general impact on global economy and other risks and uncertainties. Some companies have also included discussion of COVID-19 in their MD&A sections when identifying potential trends, uncertainties and projections regarding expected future impact. Several companies have also revised their previously issued earnings guidance in light of the potential impact of COVID-19. Companies should continue to assess what disclosure would be appropriate in light of the impact COVID-19 could have on their business.
Additional Assistance from the SEC
The SEC previously published statements encouraging registrants to monitor the necessity for disclosures regarding the COVID-19 outbreak4 and to contact the SEC for relief or guidance on the effects of COVID-19 on financial reporting for affected parties.5 Companies that require additional or different assistance from what is provided under the Order or the current SEC guidance are encouraged to contact the SEC staff, who will be available to help address issues on a case-by-case basis in light of their fact-specific nature.
Coronavirus: Managing business impact and legal risks
1 The press release announcing the Order is available here. The Order is available here. The Order was issued under Section 36 of the Securities and Exchange Act of 1934 (the “Exchange Act”). The Division of Investment Management also issued a staff statement regarding certain in-person board voting requirements under the Investment Company Act of 1940, which is available here.
2 The Order applies to all registrants (as defined in Exchange Act Rule 12b-2) subject to the reporting requirements of Exchange Act Section 13(a) or 15(d), and any person required to make any filings with respect to such a registrant, with respect to any requirement to file or furnish materials with the Commission under Exchange Act Sections 13(a), 13(f), 13(g), 14(a), 14(c), 14(f), 15(d) and Regulations 13A, Regulation 13D-G (except for those provisions mandating the filing of Schedule 13D or amendments to Schedule 13D), 14A, 14C and 15D, and Exchange Act Rules 13f-1, and 14f-1, as applicable.
3 The company’s DEFA14A is available here.
4 Available here.
5 Available here.
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