SEC Extends March 4 Order Granting Deadline and Annual Meeting Relief

Division of Corporation Finance Issues COVID-19 Disclosure Guidance

On March 25, 2020, the SEC extended its March 4 Order granting exemptions to reporting and proxy delivery requirements for public companies. The SEC’s Division of Corporation Finance also issued Disclosure Guidance Topic No. 9 – Coronavirus (COVID-19).

The extension of the March 4 Order (described in our advisory here) provides reporting relief for public companies with reports due on or before July 1, 2020. This means that the filing of quarterly reports otherwise due May 11 (for accelerated filers and large accelerated filers) or May 15 (for non-accelerated filers), as the case may be, may be delayed by up to 45 days. In order to take advantage of this reporting extension, a company must file a Form 8-K report that includes a summary of why the relief is necessary. The SEC’s updated Order provides that it may “provide extensions to the time period for the relief, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant.”

In Disclosure Guidance Topic No. 9 the Division of Corporation Finance provides the staff’s current views regarding disclosure and other securities law obligations that companies should consider with respect to COVID-19 and related business and market disruptions.  The guidance encourages timely reporting while recognizing that it may be difficult to assess or predict with precision the broad effects of COVID-19 on industries or individual companies. The guidance suggests that disclosure of COVID-19-related risks and COVID-19-related effects may be necessary or appropriate in management’s discussion and analysis, the business section, risk factors, legal proceedings, disclosure controls and procedures, internal control over financial reporting, and the financial statements. The guidance provides several questions companies should consider with respect to disclosure obligations:

• How has COVID-19 impacted your financial condition and results of operations? 
• How has COVID-19 impacted your capital and financial resources, including your overall liquidity position and outlook?
• How do you expect COVID-19 to affect assets on your balance sheet and your ability to timely account for those assets? 
• Do you anticipate any material impairments (e.g., with respect to goodwill, intangible assets, long-lived assets, right of use assets, investment securities), increases in allowances for credit losses, restructuring charges, other expenses, or changes in accounting judgments that have had or are reasonably likely to have a material impact on your financial statements?
• Have COVID-19-related circumstances such as remote work arrangements adversely affected your ability to maintain operations, including financial reporting systems, internal control over financial reporting and disclosure controls and procedures?
• Have you experienced challenges in implementing your business continuity plans or do you foresee requiring material expenditures to do so? 
• Do you expect COVID-19 to materially affect the demand for your products or services?
• Do you anticipate a material adverse impact of COVID-19 on your supply chain or the methods used to distribute your products or services?  Do you expect the anticipated impact of COVID-19 to materially change the relationship between costs and revenues?
• Will your operations be materially impacted by any constraints or other impacts on your human capital resources and productivity?
• Are travel restrictions and border closures expected to have a material impact on your ability to operate and achieve your business goals?

The guidance reminds companies and insiders regarding the need to refrain from trading prior to dissemination of material non-public information related to COVID-19 as well as the importance of avoiding selective disclosures in respect to Regulation FD. The guidance also offers suggestions regarding non-GAAP financial measure disclosures.