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SEC Extends Conditional Exemption From Reporting for Public Companies Affected by COVID-19 and Provides Disclosure Guidance

March 26, 2020

SEC

On March 25, 2020, the SEC issued an order granting temporary relief from the filing deadlines for certain SEC filings due between March 1, 2020, and July 1, 2020. This order supersedes the SEC’s March 4 order.

Pursuant to the March 25 order, public companies that can’t meet the filing deadlines for certain documents to be filed under the Securities Exchange Act of 1934, including Form 10-K and Form 10-Q, as a result of COVID-19 will be given an additional 45 days from the original due date to file the report. Therefore, this order is applicable to Form 10-Ks and Form 10-Qs due for the period ending March 31, 2020. While this order applies to Form 8-Ks, it is less likely that a situation will arise where a Form 8-K could not be timely filed as a result of COVID-19 factors. However, this order does not apply to Schedule 13D filings (beneficial owner reports) or amendments to Schedule 13D filings.

Relief is contingent upon a series of factors and requirements. The public company is required to file a Form 8-K (or a Form 6-K, if applicable) by the later of March 16 or the original filing date of the report stating:

  • that it is relying on the March 25 order;
  • a brief description of the reasons why the company could not make the filing on a timely basis;
  • the estimated date by which the filing is expected to be filed; and
  • a company-specific risk factor or factors explaining the impact, if material, of COVID-19 on its business.

In the event that a filing cannot be made timely because of the inability of any person, other than the company, to furnish any required opinion, report, or certification, the Form 8-K (or Form 6-K) shall have attached as an exhibit a statement signed by such person stating the specific reasons why such person is unable to furnish the required opinion, report or certification on or before such report must be filed.

Companies who avail themselves of the extended filing deadline under the March 25 order will not need to file a Form 12b-25 (Notification of Late Filing) as long as they comply with the extended due date. 

On March 25, 2020, the SEC also issued a press release that clarified staff guidance on items covered in the March 25 order as follows:

  • For purposes of eligibility to use Form S-3, Form S-8 and the current public information eligibility requirements of Rule 144(c) a company relying on the March 25 order will be considered current and timely (in the case of a Form S-3) in its Exchange Act filing requirements if it was current and timely (in the case of a Form S-3) 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; and
  • Companies that receive an extension on filing a Form 10-K or a Form 10-Q pursuant to the March 25 order will be considered to have a due date 45 days after the filing deadline for the report. As such, those companies will be permitted to rely on Rule 12b-25 if they are unable to file the required reports on or before the extended due date.

Also on March 25, 2020, the SEC Division of Corporate Finance staff provided its views on COVID-19 disclosure in CF Disclosure Guidance; Topic 9 Coronavirus (COVID-19). The Corporate Finance staff:

  • Listed a series of questions for companies to consider when drafting COVID-19 disclosure including, but not limited to, how has COVID-19 impacted a company’s financial condition, results of operations, future prospects, overall liquidity position and outlook, balance sheet and how alternative work arrangements have adversely affected the company’s ability to maintain operations, including financial reporting systems, internal control over financial reporting and disclosure controls and procedures;
  • Confirmed the need to refrain from trading prior to dissemination of material non-public information. For example, 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;
  • Encouraged companies to proactively address financial reporting matters earlier than usual; and
  • Stated that companies may consider presenting non-GAAP metrics related to COVID-19, or changing the method by which it calculates a metric as a result of COVID-19 and reminded companies that such measures should be utilized only when management and the Board are analyzing the impacts of COVID-19 and such measures, if publicly reported, must be reconciled to GAAP. Where a GAAP financial measure is not available at the time of an earnings release because the measure may be impacted by COVID -19 related adjustments that require additional information or analysis to complete, the SEC will permit reconciliation to preliminary GAAP results that include provisional amounts (or a range of amounts) based upon a reasonable estimate.

The SEC will continue to monitor COVID-19 developments and their impacts on companies and investors and will consider additional relief and guidance as necessary. The SEC also requested that companies and individuals should continue to contact the SEC with questions or if they believe there are additional areas where guidance or temporary relief may be necessary by submitting such requests via the online form available here.

The March 25 order can be found here, and the SEC’s CF Disclosure Guidance; Topic 9 Coronavirus (COVID-19) can be found at here

For additional information, please contact Bob Shrosbree (313-568-6641 or rshrosbree@dykema.com) or Tom Vaughn (313-568-652 or tvaughn@dykema.com).

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