COVID-19: Guidance from the SEC for Public Companies

Background.  On March 25, 2020, the Division of Corporation Finance of the Securities and Exchange Commission issued CF Disclosure Guidance: Topic No. 9 (Coronavirus (COVID-19)) (the “COVID-19 Guidance”). The COVID-19 Guidance summarizes the Staff’s views regarding disclosure and other securities law obligations that companies should consider with respect to the novel coronavirus (COVID-19).

Prior Regulatory Relief.  The Commission has already provided some targeted relief, such as:

  • On March 4, 2020 (which was updated and superseded on March 25, 2020), the Commission issued an order that, subject to certain conditions, provides publicly traded companies with an additional 45 days to file certain Exchange Act filings (e.g., 10-K, 10-Q, proxy statement) that otherwise would have been due between March 1, 2020 and July 1, 2020, so long as a Form 8-K is filed for each delayed filing by the deadline for such filing disclosing:
  1. reliance on this order,
  2. a brief description of the reasons why it could not file such report on a timely basis,
  3. the estimated date when the filing is expected to be filed,
  4. a company specific risk factor or factors explaining the impact, if material, of COVID-10 on its business, and
  5. if the reason the filing cannot be timely relates to the inability of any person (other than the registrant) to furnish any required opinion, report or certification (with a statement signed by such person filed as an exhibit).

A filing under Rule 12b-25 would not need to be filed under these circumstances, unless such filing was not made within this additional 45 day period.

  • On March 13, 2020, the Commission issued guidance on conducting “virtual” or “hybrid” annual meetings of shareholders in compliance with federal proxy rules, including changing the date, time and location of an annual meeting for which a proxy statement has already been mailed.

Considerations for Future Filings.  In the COVID-19 Guidance, the Staff reiterates the need for timely reporting, including the effects of COVID-19 has had on a company, what management expects the future impact will be, how management is responding to evolving events, and how it is planning for COVID-19-related uncertainties. The Staff appreciates that it may be difficult to assess or predict with precision given the dynamics on industries or individual companies and many other factors beyond the company’s control and knowledge. In light of these developments, the Staff encourages companies to revisit disclosure to incorporate these risks and COVID-19-related effects 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.

To assist companies, the Staff prepared the following questions to consider:

  • How has COVID-19 impacted your financial condition and results of operations? In light of changing trends and the overall economic outlook, how do you expect COVID-19 to impact your future operating results and near-and-long-term financial condition? Do you expect that COVID-19 will impact future operations differently than how it affected the current period?
  • How has COVID-19 impacted your capital and financial resources, including your overall liquidity position and outlook? Has your cost of or access to capital and funding sources, such as revolving credit facilities or other sources changed, or is it reasonably likely to change? Have your sources or uses of cash otherwise been materially impacted? Is there a material uncertainty about your ongoing ability to meet the covenants of your credit agreements? If a material liquidity deficiency has been identified, what course of action has the company taken or proposed to take to remedy the deficiency? Consider the requirement to disclose known trends and uncertainties as it relates to your ability to service your debt or other financial obligations, access the debt markets, including commercial paper or other short-term financing arrangements, maturity mismatches between borrowing sources and the assets funded by those sources, changes in terms requested by counterparties, changes in the valuation of collateral, and counterparty or customer risk.[1] Do you expect to disclose or incur any material COVID-19-related contingencies?
  • How do you expect COVID-19 to affect assets on your balance sheet and your ability to timely account for those assets? For example, will there be significant changes in judgments in determining the fair-value of assets measured in accordance with U.S GAAP or IFRS?
  • 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? If so, what changes in your controls have occurred during the current period that materially affect or are reasonably likely to materially affect your internal control over financial reporting? What challenges do you anticipate in your ability to maintain these systems and controls?
  • Have you experienced challenges in implementing your business continuity plans or do you foresee requiring material expenditures to do so? Do you face any material resource constraints in implementing these plans?
  • 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?

This list of questions is intended by the Staff to be illustrative, but not exhaustive.

Other Guidance.  The Staff also reminds companies in the COVID-19 Guidance that:

  • Companies and other related persons need to refrain from trading prior to the dissemination of material non-public information, including the avoidance of selective disclosure;
  • Companies should be engaging with their auditors early to address novel or complex accounting issues that may take time to resolve; and
  • Where a GAAP financial measure is not available at the time of the earnings release because the measure may be impacted by COVID-19-related adjustments that may require additional information and analysis to complete, the Staff will not object to companies reconciling to a non-GAAP financial measure in earnings releases to preliminary GAAP results that either include provisional amount(s) based on a reasonable estimate, or a range of reasonably estimable GAAP results.

Next Steps.  Public companies should proactively reach out to their auditors and disclosure counsel to consider how to best assist investors in seeing your business through the eyes of management in light of COVID-19.

Our combined team of Stevens & Lee lawyers and other professionals in our affiliated companies is ready to help you with any of the foregoing steps. We are working together to stay current on new developments and to assist clients with issues affecting them during this unprecedented global health challenge.

If you have any questions concerning the above guidance, please contact David W. Swartz, Charles “Chuck” J. Ferry, Edward “Ned” C. Hogan, Dean H. Dusinberre, Sunjeet S. Gill, Stephanie R. Hager or the Stevens & Lee attorney with whom you regularly work.


[1] See Commission Guidance on Presentation of Liquidity and Capital Resources Disclosures in Management’s Discussion and Analysis, SEC Release No. 33-9144 (Sept. 28, 2010), available at https://www.sec.gov/rules/interp/2010/33-9144.pdf.

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