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Coronavirus and Guidance on SEC Disclosures

The coronavirus (COVID-19) outbreak has impacted publicly traded companies that provide information to trading markets, shareholders and to the Securities and Exchange Commission (SEC). Companies need to be mindful with respect to disclosures in annual and quarterly reports, earnings releases, current reports, and public and private securities offering documents.

On March 25, 2020, the SEC’s Division of Corporation Finance issued Coronavirus (COVID-19) Disclosure Guidance, setting forth the SEC’s views regarding disclosure considerations and other securities law matters related to COVID-19 pandemic. The SEC notes that the effects of COVID-19 “are difficult to assess or predict with precision” and “depend on many factors beyond a company’s control and knowledge.” The guidance provides a comprehensive ( non-exhaustive) list of issues for companies to consider. As always, aassessing the effects of COVID-19 and related risks is a facts and circumstances analysis, and disclosures should be specific to individual circumstances, avoiding broad or generic language. We summarize and discuss best practices below.

Financial condition and results of operations: Focus on the impact of COVID-19 on near-and-long-term operating results and general financial condition. Update the information related to known “trends” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Liquidity: Discuss the impact on overall liquidity position and liquidity outlook. Disclose if your access to capital and funding sources changed, or is it reasonably likely to change. Consider the requirement to disclose known trends and uncertainties as it relates to your ability to comply with debt covenants or service your debt or other financial obligations.

Balance Sheet Issues: Consider if there will be an effect on the assets on your balance sheet and your ability to timely account for those assets, or if there will be significant changes in judgments in determining the fair-value of assets measured in accordance with U.S. GAAP or IFRS. Disclose if you anticipate any material impairments (e.g., with respect to goodwill, intangible assets or investment securities).

Risk Factors and Operational Issues: Review Risk Factors and other public disclosures related to: demand for products and services, supply chainworkforcetaxationemployee benefits, contingency planning issues, insurance, travel restrictions, market volatility and investment exposure.

Remote Work Issues: Consider if remote work arrangements have adversely affected your ability to maintain operations, including financial reporting systems. Discuss challenges you anticipate in your ability to maintain your systems and controls.

 

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Justin Anslow, Sheppard Mullin Law Firm, New York, Corporate Law Attorney
Associate

Justin Anslow is an associate in the Corporate Practice Group in the firm's New York office. Mr. Anslow’s practice focuses on advising public and private companies in securities offerings, corporate governance and SEC reporting. Mr. Anslow's experience includes representation of issuers of securities as well as investors, underwriters and placement agents in connection with both public and private offerings of equity and debt securities. Mr. Anslow assists clients with business entity formation matters, general corporate law matters and securities law compliance,...

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Richard Friedman, Sheppard Mullin Law Firm, New York, Corporate Law Attorney
Partner

Richard A. Friedman is a partner in the Corporate Practice Group in the firm's New York office.

Areas of Practice

Mr. Friedman is principally engaged in the practice of Corporate and Securities Law, with a concentration on public offerings and private placements. His extensive experience includes reverse mergers (both domestic and foreign companies), secured and unsecured private equity financing transactions (PIPEs), as well as initial public offerings (IPOs), registered direct offerings (RDs) and shelf offerings. He also represents publicly-held companies with their 1934 Act reporting obligations and with NASDAQ, AMEX, NYSE and other exchange listing and compliance matters. In addition, he represents both public and private companies with a wide variety of corporate transactions, including mergers and acquisitions, joint ventures, employment and shareholder agreements, and the formation of private equity hedge funds. Mr. Friedman’s practice also involves representation of Broker-Dealers and Registered Individuals in a wide array of matters, including ongoing compliance, regulatory inquiries and disciplinary proceedings before governmental and self-regulatory organizations, such as the SEC, FINRA, NYSE and State Securities Commissions.

212-634-3031
Robert L. Wernli, Jr., lawyer corporate attorney, Sheppard Mullin law firm
Special Counsel

Robert L. Wernli, Jr. is a special counsel in the Corporate Practice Group in the firm's Del Mar office.

Mr. Wernli specializes in corporate and securities law and has worked on numerous public and private capital raising transactions, mergers and acquisitions (buy-side and sell-side) and other strategic transactions. Mr. Wernli has also regularly advised clients on all aspects of SEC reporting and listing exchange compliance matters, corporate governance and general corporate law matters.

Areas of Practice

Securities. Mr....

858-720-8953