The impact of COVID-19 has been swift and widespread. On March 4, March 13 and March 25, 2020, the Securities and Exchange Commission (“SEC”) provided guidance and relief to public companies and other filers addressing these challenges as summarized below. This is a rapidly developing topic, so you are encouraged to get the latest guidance and insight by contacting a member of HSE’s Securities and Capital Markets Team.
SEC Filing Relief: The SEC has used its discretionary authority to delay (by up to 45 days) a wide array of filings due from March 1 through July 1 of this year for issuers and other filers impacted by COVID-19. Issuers and other filers are cautioned to conduct an analysis of the applicability of the SEC’s relief order and their underlying disclosure obligations under the federal securities laws before relying on this order. If issuers and other filers determine they are eligible for relief and elect to seek it, they must make certain disclosures in a current report on Form 8-K or 6-K including the basis for and extent to which relief is being sought.
Annual Meeting Guidance and Relief: The SEC has issued guidance regarding compliance with the federal proxy rules in light of the health, transportation, and other logistical issues raised by the spread of COVID-19.
In issuing this guidance, the SEC staff expects all parties involved in the proxy process to be flexible and work collaboratively. The SEC will expect issuers to disclose their decisions surrounding the date, time, and location of their annual meetings, and any changes to such decisions promptly to give shareholders and other parties reasonable lead time in preparing for the meetings.
Change in Meeting Date, Time and Location: The SEC staff will take the position that an issuer that has already mailed and filed its definitive proxy materials may notify shareholders of a change in the date, time, or location of its annual meeting without mailing additional soliciting materials or amending its proxy materials if it:
- issues a press release announcing such change;
- files the announcement as definitive additional soliciting materials on EDGAR; and
- takes all reasonable steps necessary to inform other intermediaries in the proxy process and other relevant market participants of such change (including third-party proxy service providers and national securities exchanges).
If an issuer has not yet mailed and filed its definitive proxy materials, the issuer should consider adding disclosure of a possibility of a change in the date, time, and location of the annual meeting due to COVID-19 concerns.
Virtual or Hybrid Meetings: If an issuer is planning to hold a virtual annual meeting or a hybrid annual meeting (where the meeting is held in-person but alternatively permits participation through electronic means), the SEC staff will expect robust disclosure of the logistical details of how shareholders can access, participate in, and vote at such a meeting.
The SEC staff is also encouraging issuers, to the extent feasible under state law, to provide shareholder proponents with a means to present their proposals electronically as opposed to requiring in-person attendance by shareholder proponents.
Shareholder Information Material Delivery Relief: Similarly, the SEC has provided relief from the delivery requirements for proxy solicitations and information statements required to be delivered to shareholders who are in areas impacted by COVID-19, provided a “good faith” effort under applicable rules has been made to furnish these materials to shareholders so impacted.
Disclosure Guidance Topic No. 9: On March 25, 2020, the Division of Corporation Finance of the SEC released a new Disclosure Guidance topic describing the SEC Staff’s current views on disclosure and other securities law obligations that companies should consider during the COVID-19 pandemic and related business and market disruptions. In this guidance, the Staff provided a list of questions for companies to consider as they consider their disclosure with respect to the COVID-19 pandemic and its effects. The guidance stresses the necessity for companies to refrain from trading in their own securities prior to disseminating material non-public information. While the SEC acknowledges that the specific impacts of COVID-19 on issuers and other filers may not yet be known, the SEC has repeatedly reminded filers of their continuing disclosure obligations, particularly in areas such as Risk Factors, Subsequent Event footnotes to financial statements, and while reporting non-GAAP financial measures in earnings releases and in financial results.
The full text of the SEC’s releases, orders and guidance can be found through the following links:
- March 4, 2020 release and order
- March 13, 2020 SEC release
- SEC Staff guidance on annual meetings
- March 25, 2020 release
- Division of Corporation Finance Disclosure Guidance: Topic No. 9
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