Corp Fin has posted four new COVID-19-related FAQs, most of which concern the interaction of Form S-3 and the SEC’s COVID-19 Order. As you know, in the COVID-19 Order, the SEC provided public companies that are unable to file timely “due to circumstances related to COVID-19” with conditional 45-day extensions to file or furnish specified SEC various reports, schedules and forms that would otherwise have been due between March 1 and July 1, 2020, provided they comply with certain requirements (see this PubCo post). If a company does not file a required report on the original due date in reliance on the COVID-19 Order, what does that mean for its use of Form S-3?
At a meeting today of the SEC’s Investor Advisory Committee, the committee discussed disclosure considerations arising in the context of COVID-19. In addition to relentlessly complimenting the SEC for its efforts during the pandemic, the committee members offered a number of valuable insights, particularly related to human capital disclosure (which one committee member characterized as “as important a mission as the SEC has ever faced”) and other stakeholder disclosures, as well as accounting, controls and liability issues. Many of the committee also seemed to be pleased with nature of the disclosure that companies were providing, even offering in-quarter information in some cases. There was also a brief discussion of virtual shareholder meetings.
Several leaders of the World Economic Forum have published Stakeholder Principles in the COVID Era, characterizing the “business community’s contribution” as “to be leaders of responsiveness and stewards of resilience.” Nice cadence—I like it. But what does it mean in practice?
Apparently, there are still a number of filings submitted on paper, and the filers are experiencing logistical difficulties submitting them. Once again, in light of health and safety concerns related to COVID-19, the Corp Fin staff is providing relief for specified paper forms submitted for the period from and including April 23, 2020 to June 30, 2020.
The Treasury Department has issued a series of FAQs related to loans made under the Paycheck Protection Program provisions of the CARES Act, one of which is addressed to borrowers that are large companies and, particularly, public companies. The FAQ provides that, to be eligible for a PPP loan, a borrower must certify, in good faith, that the loan is necessary to support continuing operations. According to the FAQ, that may be difficult in some cases.
Like Nasdaq (see this Pubco post), the NYSE has filed with the SEC, and the SEC has declared immediately effective, a rule change providing relief to listed companies that, in light of market conditions resulting from the impact of COVID-19, have fallen out of compliance with two of the NYSE continued listing standards. The relief will provide listed companies with a longer period to regain compliance with the Dollar Price Standard (i.e., when the average closing price of the security is less than $1.00 over a consecutive 30 trading-day period) and the $50 Million Standard (i.e., when a company’s average global market cap over a consecutive 30 trading-day period is less than $50 million and, at the same time, stockholders’ equity is less than $50 million) by tolling the compliance periods through June 30, 2020. Since the last week of February 2020, the NYSE has witnessed an unusually high number of listed companies that have fallen out of compliance with these continued listing standards. The NYSE “believes that it is undesirable to impose on companies in the midst of this crisis the additional burden of attempting to return to compliance with these market price-based standards while the crisis is ongoing, which may be unrealistic for many companies in the immediate term whereas their prospects may be better once the current extraordinary conditions have passed.”
Three Silicon Valley firms, Cooley being one, have submitted a rulemaking petition to the SEC asking the SEC to amend Rules 11 and 302 of Reg S-T to allow the use of electronic signatures in SEC filings. Although the staff has granted some flexibility in connection with retention of manual signatures in its Statement Regarding Rule 302(b) of Regulation S-T in Light of COVID-19 Concerns, the petition contends that, given current health and safety requirements, “obtaining and retaining manual signatures in compliance with the Staff Statement remains a significant logistical burden.”
The SEC has declared immediately effective a Nasdaq rule proposal providing relief to listed companies that, in light of market conditions resulting from the impact of COVID-19, have fallen out of compliance with two of the Nasdaq continued listing standards. The relief will provide companies with a longer period to regain compliance with the bid price and “market value of publicly held shares” continued listing requirements by tolling the compliance periods through June 30, 2020. Nasdaq believes that this temporary tolling will permit companies to focus on their business operations and the health and safety of their employees, customers and communities, rather than on Nasdaq listing requirements. In addition, Nasdaq believes that temporary tolling will allow investments in these shares without concern for near-term delisting.
Given the pervasiveness of COVID-19, one issue that boards have had to face is what to do if the CEO or other executive critical to business continuity is suddenly taken ill or required to self-isolate because of exposure to the virus. What about succession planning? How should the absence be communicated? A couple of recent pieces from prominent consultants provide some guidance on these issues.
ISS now has established a COVID-19 resource center, which offers, among other things, a searchable list of companies that are holding virtual meetings this proxy season. As of April 15, the tally for virtual meetings in the U.S. held or to be held this proxy season is 1,015; according to ISS, that number was 286 for all of calendar 2019. In addition, 83 meetings have so far been cancelled or postponed.