Capital Markets Alert | March.30.2020
On March 25, 2020, the Securities and Exchange Commission issued an exemptive order modifying its March 4, 2020 order granting regulatory relief for certain publicly-traded company filing obligations under the federal securities laws in light of the coronavirus (COVID-19) outbreak. The SEC’s March 4, 2020 order granted public companies impacted by COVID-19 extra time to file or furnish materials due between March 1 and April 30, 2020. The modified order extends this period through July 1, 2020. Impacted companies will have an extra 45 days to file or furnish materials under the Exchange Act and associated regulations. This includes periodic reports such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, among others. The original order can be found here, and the modified order can be found here.
As a condition to taking advantage of the filing extension, affected companies who are unable to meet a filing deadline due to circumstances related to COVID-19 must make a filing on Form 8-K or 6-K explaining, among other things, (1) why the extra time in needed, (2) when the company expects to file the forms and (3) if needed, a risk factor explaining the impact of the coronavirus on the company’s business. The explanatory filing must be made by the original filing deadline of the affected report.
SEC Chairman Jay Clayton noted, “Health and safety continue to be our first priority. These actions provide temporary, targeted relief to issuers […] affected by COVID-19. At the same time, we encourage public companies to provide current and forward-looking information to their investors and, in these uncertain times, companies are reminded that they can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for forward-looking statements.”
The SEC order also exempts companies from the obligation to deliver required proxy statements, annual reports and other soliciting materials to security holders if (1) the security holder has a mailing address in an area where, as a result of COVID-19, the customary delivery service used by the company has been suspended and (2) the company or other person making a solicitation has made a good-faith effort to furnish materials to the security holder.
For purposes of determining Form S-3 or Form F-3 eligibility and WKSI status, a company relying on the exemptive order will be considered current and timely in its Exchange Act filing requirements if it was current and timely as of the first day of the relief period and it files any report due during the relief period within 45 days of the filing deadline for the report. The same approach will apply to a company’s eligibility to file a Form S-8 and for purposes of determining whether it is current in its reports for purposes of Rule 144(c).
The SEC has also recently advised all companies “to consider their activities in light of their disclosure obligations under the federal securities laws.” Hundreds of public companies have added new coronavirus risk factors or added language about the outbreak to existing risk factors. The Commission also reminds those making coronavirus disclosures “to take the necessary steps to avoid selective disclosures and to disseminate such information broadly. Depending on a company’s particular circumstances, it should consider whether it may need to revisit, refresh, or update previous disclosure to the extent that the information becomes materially inaccurate.” On March 25, 2020, the Division of Corporation Finance issued Disclosure Guidance No. 9, which encourages timely reporting and emphasizes that “assessing the evolving effects of COVID-19 and related risks will be a facts and circumstances analysis” and “disclosure about these risks and effects, including how the company and management are responding to them, should be specific to a company’s situation.” Orrick can advise companies considering new language or about steps that might be considered in revising or updating existing disclosures.
The SEC has further cautioned against insider use of coronavirus-related information: “Where COVID-19 has affected a company in a way that would be material to investors or where a company has become aware of a risk related to COVID-19 that would be material to investors, the company, its directors and officers, and other corporate insiders who are aware of these matters should refrain from trading in the company’s securities until such information is disclosed to the public.”
Please contact any member of Orrick's Capital Markets Group for further assistance regarding coronavirus disclosures and other legal impacts of the coronavirus on your company.