On March 4, 2020, the Securities and Exchange Commission issued an Order granting conditional relief from certain filing obligations under the federal securities laws for reporting companies whose compliance may be delayed by the coronavirus disease (COVID-19). In the press release accompanying this unprecedented Order, SEC Chairman Jay Clayton noted, “The health and safety of all participants in our markets is of paramount importance. While timely public filing of Exchange Act reports is a cornerstone of well-functioning markets, we recognize that this situation may prevent certain issuers from compiling these reports within the required timeframe.”
The Order grants up to a 45-day relief from the filing deadlines for reports under the Exchange Act of 1934 that were due between March 1, 2020, and April 30, 2020, if the reporting company is unable to meet the filing deadline due to circumstances related to COVID-19. Public companies may take advantage of this relief by furnishing a Form 8-K or 6-K by the later date of March 16, 2020, or the original filing deadline. The Form 8-K or 6-K must include all of the following:
- A statement that the company is relying on the SEC Order;
- A brief description of the reasons why the company was unable to file the report on a timely basis (the Order lists certain reasons such as: disruptions to transportation and limited access to facilities, support staff, and professional advisors);
- The estimated date by which the filing is expected to be made; and
- If applicable:
- a risk factor explaining the material impact of COVID-19 on the company’s business; and
- an exhibit signed by a person, other than the company, stating specific reasons why such person is unable to furnish a required opinion, report, or certification, if such inability is the reason for the company’s failure to make a timely report.
In addition to the required items in the Form 8-K or 6-K, the company must also disclose in the delayed filing that the company relied on the SEC Order and the reasons why it was unable to file the report on a timely basis.
Additional Securities Law Considerations
In addition to the above referenced relief from certain filing deadlines, there are various other securities considerations that should be taken into account with respect to COVID-19.
- Disclosure Considerations.
- Companies should consider whether an update to its risk factors, forward-looking statements, and business and MD&A sections is required as a result of COVID-19.
- Companies should not make selective disclosures, but rather broadly disseminate material information about COVID-19. To avoid selective disclosure, communications about COVID-19 should be made in consultation with the company’s investor relations and legal teams.
- Depending on the company’s circumstances, it should consider revisiting and updating previous disclosures in the event the information has become materially inaccurate.
- Where the company or insiders become aware of material information regarding the company’s business related to COVID-19, the company should take steps to ensure insiders refrain from engaging in securities transactions with the public until investors have been appropriately informed.
- Companies can take advantage of the safe harbor under §21E of the Exchange Act when providing information in the effort to keep investors informed about material developments related to COVID-19.
- Location of Annual Shareholder Meeting. Many companies with upcoming annual shareholder meetings should also consider whether an in-person meeting at the company’s facilities is the appropriate venue for the annual shareholder meeting. With the rise of COVID-19, and the necessary safety precautions that come with such an infectious disease, companies may want to consider switching to a virtual meeting or changing the physical venue of the meeting to a non-company facility that has lower general traffic. Companies considering a change should consult with counsel regarding applicable state law and the company’s governance documents related to notice, necessary board and committee approvals, proxy statement disclosures, and whether virtual meetings are permitted. A significant number of states allow for meetings to be held solely by “remote communication,” and there are additional states that allow for remote participation in meetings held at a physical location, commonly referred to as “hybrid meetings.” See our blog post here for additional information pertaining to virtual meetings. If a company has already distributed definitive proxy statement materials to its shareholders in anticipation of the meeting, additional consideration should be given to state law notice requirements and meeting procedures. From an SEC perspective, the notice required pursuant to state corporate law should be filed with the SEC as additional proxy solicitation materials. For example, on March 4, 2020, Starbucks Corporation changed its annual shareholder meeting from a physical location to a virtual-only format just 14 days prior to the date of the meeting.
As the impacts of COVID-19 on the marketplace become better known, the SEC and other regulators may issue additional opinions and guidance on how to deal with the impacts of the disease. Be sure to continue to look for updated guidance going forward and to reach out to your Porter Wright contact if you have any questions related to challenges posed by COVID-19.