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Disclosure Guidance for Public Companies Affected By COVID-19

On Wednesday, the SEC’s Division of Corporation Finance (the “staff”) issued Disclosure Guidance: Topic 9, providing guidance on disclosure and other securities law obligations for companies affected by COVID-19 and related business and market disruptions. The press release concerning this Guidance also announced the SEC’s issuance of an updated exemptive order extending the time periods for certain public company filing obligations that were covered by its previous extension, which we report on here. The Guidance covers COVID-19 disclosures, securities trading in light of the pandemic and certain financial reporting issues.

Disclosing the Evolving Impact of COVID-19.

In recognition of the rapidly evolving COVID-19 pandemic and the uncertainties it brings to public companies and markets, the Guidance provides help to public companies as they prepare their disclosures. The staff notes that because the impact of COVID-19 on companies and management’s response to and preparation for the related uncertainties can be material to investors, they are paying special attention to COVID-19 disclosures. They also note that timely reporting of robust and complete information continues to be vital to functioning markets, and encourage companies to timely file their reports when possible, notwithstanding the relief made available in the order issued by the SEC on March 25th.

The Guidance suggests that regardless of the parameters of existing specific line item requirements for periodic reports, COVID-19–related disclosure may be appropriate in a company’s MD&A, business section, risk factors, legal proceedings, disclosure controls and procedures, internal controls over financial reporting and financial statements. In preparing disclosures, the Guidance suggests that companies should make broad inquiries into how COVID-19 has or may impact their business and prospects and sets forth a “non-exhaustive list” of helpful questions that focus on how COVID-19–related effects could impact or potentially affect, among other things:

  • financial condition, results of operations and future operating results, effects on the balance sheet and material impairments;
  • capital and financial resources, and overall liquidity position and outlook, including the impact on credit facilities, any material liquidity deficiency and the ability to service debt or other financial obligations;
  • operations, including financial reporting systems, internal control over financial reporting and disclosure controls and procedures, the company response to these impacts and future expected challenges;
  • demand for products or services and supply chain and distribution methods; and
  • workforce and workforce management.

The Guidance advises companies to indicate how they intend to respond to these challenges and uncertainties, noting that companies providing forward-looking information to keep investors informed about material developments relating to known trends or uncertainties due to the coronavirus, may take steps to rely on the safe harbor in Section 27A of the Securities Act and Section 21E of the Exchange Act.

Companies are also advised to proactively review and revise previous disclosures to ensure that they have not become inaccurate in light of the rapid changes to markets and individual company circumstances.

Refraining from Trading Prior to Dissemination of Information.

The SEC encourages public companies affected by COVID-19 to consider their activities in light of their disclosure obligations under the federal securities laws, including refraining from engaging in securities transactions with the public and discouraging trading by directors and officers until the relevant risks have been disclosed.

Reporting Earning and Financial Results.

The staff recognizes that the evolving impact of COVID-19 on businesses may present complex or new accounting issues that could interfere with timely filings and encourages companies to identify and proactively address possible bottlenecks in their financial reporting processes. The staff notes that if a company presents a non-GAAP financial measure or performance metric to adjust for or explain the impact of COVID-19, it should highlight why management finds the measure or metric useful and helpful to investors in assessing such impact on the company’s financial position and results of operations. In addition, when a GAAP financial measure is not available at the time of an earnings release due to COVID-19-related adjustments that may require additional information, companies may reconcile a non-GAAP financial measure to preliminary GAAP results that either include provisional amount(s) based on a reasonable estimate, or a range of reasonably estimable GAAP results, provided that the non-GAAP measure is not disclosed more prominently than the most directly comparable GAAP measure or range of measures. Any such provisional amount or range should reflect a reasonable estimate of COVID-19–related charges not yet finalized. If a company presents reconciled non-GAAP financial measures, it should explain, to the extent practicable, why the line item(s) or accounting is incomplete, and what additional information or analysis may be needed to complete the accounting. Finally, the staff indicates that in Form 10-K or 10-Q filings or other filings where GAAP financial statements are required, companies should reconcile to GAAP results and should not include provisional amounts or a range of estimated results. Any non-GAAP financial measures reconciled to provisional amount(s) or an estimated range of GAAP financial measures should be limited to those non-GAAP financial measures used to report financial results to the board of directors and should not be used solely to present a more favorable view of the company.

Additional Guidance

In recognition of the difficulties presented by the pandemic and the limitations of the Guidance, the staff asks companies to put health and safety first in pursuing their disclosure obligations and to contact the staff with questions or suggestions for any necessary additional guidance or temporary relief. As events evolve, the staff expects to continue to provide additional guidance, as appropriate.


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Anne L. Bruno is a Member at Mintz who advises clients ranging from start-ups to multinational public companies on issues related to corporate and employment law, including executive compensation, employee benefits, securities law, and corporate governance. She is also a key member of the firm’s multidisciplinary ESG practice, helping corporate boards, companies, and their investors navigate a broad range of environmental, social, and governance considerations.