The U.S. Securities and Exchange Commission (SEC) announced on March 4 that it is providing conditional regulatory and time-limited relief from certain filing and periodic reporting obligations under the Securities Exchange Act of 1934, as amended (Exchange Act), to companies affected by the coronavirus disease 2019 (COVID-19). The conditional relief was announced in SEC Release No. 34-88318 (the Order).

The filings and periodic reporting obligations for which relief is available include Forms 10-Q and 10-K. It is important to note that the relief is only available to a company that cannot timely meet a filing obligation because of circumstances related to COVID-19. Examples of potential qualifying circumstances may include the inability of issuer staff or outside auditors to function normally because of illness or quarantines. The available relief is a 45-day extension of the due date of the filing, with a longer extension possibly available upon application to the SEC. The availability of relief is currently scheduled to conclude on April 30, 2020, although the SEC noted it may extend this time period if necessary.

The SEC also issued a press release in conjunction with the Order. In the press release, the SEC indicated that all companies should consider their disclosure obligations with respect to COVID-19. Quoting from the press release:

Disclosure Considerations for All Companies

The Commission encourages all companies and other related persons to consider their activities in light of their disclosure obligations under the federal securities laws. For example, where a company has become aware of a risk related to the coronavirus that would be material to its investors, it should refrain from engaging in securities transactions with the public and to take steps to prevent directors and officers (and other corporate insiders who are aware of these matters) from initiating such transactions until investors have been appropriately informed about the risk.

When companies do disclose material information related to the impacts of the coronavirus, they are reminded to take the necessary steps to avoid selective disclosures and to disseminate such information broadly. Depending on a company’s particular circumstances, it should consider whether it may need to revisit, refresh, or update previous disclosure to the extent that the information becomes materially inaccurate.

Companies providing forward-looking information in an effort to keep investors informed about material developments, including known trends or uncertainties regarding the coronavirus, can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for this information.

All companies subject to Exchange Act filing requirements should consider whether they should be making COVID-19 specific disclosures. As a general practice, we believe that specific disclosure is most helpful when addressing potential material developments, as opposed to generic risk statements, such as “our business and operations may be adversely affected by COVID-19.” As noted by the SEC, properly drafted disclosure should be within the safe harbor for forward-looking information.

In the press release, SEC Chairman Jay Clayton said, “I urge companies to work with their audit committees and auditors to ensure that their financial reporting, auditing and review processes are as robust as practicable in light of the circumstances in meeting the applicable requirements.” We believe that the relief provided in the Order may be of particular importance with respect to the preparation of financial statements to be included in Exchange Act filings.

The Order provides two types of relief, as summarized below: (1) for periodic reporting and (2) for delivery of soliciting materials to security holders.

1. 45-day extension for periodic reporting when relief is required.

The Order’s relief applies to a registrant’s periodic reporting requirements (including Forms 10-Q and 10-K) under Exchange Act Sections 13(a), 13(f), 13(g), 14(a), 14(c), 14(f) and 15(d); Regulations 13A, 13D-G (except for those provisions mandating the filing of Schedule 13D or amendments to Schedule 13D), 14A, 14C and 15D; and Exchange Act Rules 13f-1 and 14f-1, as applicable.1

Disruptions to transportation and limited access to facilities, support staff and professional advisers could make it more difficult for companies to timely meet filing obligations, particularly U.S. companies with significant operations in areas affected by the disease or companies located in those regions. A company unable to make timely filing due to circumstances related to COVID-19 may seek relief by furnishing to the SEC a Form 8-K (or Form 6-K, as applicable) by the later of March 16 or the original filing deadline of the report, stating:

  • that the company is relying on the Order

  • a brief description of the reasons why it could not file the report, schedule or form on a timely basis

  • the estimated date by which the report, schedule or form is expected to be filed

  • if appropriate, a risk factor explaining, if material, the impact of COVID-19 on its business

  • if the reason the subject report cannot be filed timely relates to the inability of any person, other than the registrant, 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 the date such report must be filed.

After submitting the initial Form 8-K discussed above, the registrant must complete the filing no later than 45 days after the original due date.2 The filing must disclose the reliance on the Order and state why the registrant could not timely file the report by the original due date. This 45-day extended deadline may assuage concerns regarding disruptions to audit timelines.3

A company that received a 45-day extension under the Order for an annual report on Form 10-K or quarterly report on Form 10-Q will be permitted to rely on Rule 12b-25 if it is unable to file the required reports on or before the extended due date.

A company relying on the Order will retain eligibility to use Form S-3 (including well-known seasoned issuer status) and Form S-8 under the Securities Act of 1933, as amended, if it was current and timely as of March 1, 2020 and it files any report due during the relief period within 45 days of the filing deadline for the report.4

2. Requirement for good faith effort to furnish soliciting materials.

The Order also grants limited relief to the proxy delivery requirements of Exchange Act Sections 14(a) and (c), Regulations 14A and 14C, and Exchange Act Rule 14f-1 thereunder. An issuer may not be able to furnish proxy statements, annual reports and other soliciting materials, as applicable, to security holders due to disruptions in mail delivery caused by COVID-19, even though it has made good faith efforts to deliver the materials. The Order does not grant relief from filing proxy materials as a condition to soliciting proxies or from attempting to deliver proxy materials; it provides relief from the inability to deliver them to the intended recipient.