Capital Markets & Securities Law Watch

On July 2, 2020, the Securities and Exchange Commission (SEC) extended the New York Stock Exchange’s (NYSE) temporary relief on shareholder-approval requirements for listed companies from June 30, 2020, to September 30, 2020.

On June 23, 2020, the Division of Corporation Finance (the Division) at the Securities and Exchange Commission (SEC) provided new guidance to companies making coronavirus-related disclosures about their operations, liquidity, and capital resources.

On May 4, 2020, the staff of the SEC’s Division of Corporation Finance issued four COVID-19 related FAQs in response to inquiries about Release No. 34-88465 (March 25, 2020), which grants filing deadline relief for Exchange Act Reports if the company makes certain prescribed disclosures on Form 8-K (the COVID-19 Relief Order).

U.S. and global market conditions have experienced market-wide declines as a result of the COVID-19 pandemic. In light of these unprecedented circumstances, many companies are struggling to remain in compliance with the price-based continued listing standards of the New York Stock Exchange (the NYSE) and The Nasdaq Stock Market LLC (Nasdaq).

The New York governor’s executive order issued March 20, 2020, suspending the application of certain statutory provisions in light of the coronavirus (COVID-19) pandemic temporarily permits corporations incorporated in New York to hold virtual-only shareholders’ meetings.

On April 8, 2020, Institutional Shareholder Services (ISS) released new policy guidance in four key areas: (1) annual meetings; (2) poison pills, shareholder rights, and boards of directors; (3) compensation issues; and (4) capital structure and payouts.

As the COVID-19 pandemic continues to depress stock prices, investment bankers have begun to recommend that public companies consider adopting shareholder rights plans to prevent strategic buyers and private equity firms from being able to acquire them on the cheap—i.e., at prices that do not reflect their long-term intrinsic value.

In response to the economic fallout of COVID-19, the New York Stock Exchange (NYSE) and Nasdaq are issuing new proposals and guidance to listed companies.

As public companies prepare for quarterly earnings releases in the midst of the COVID-19 pandemic, they face the challenge of providing meaningful, forward-looking disclosure based on future projections and historical data of questionable relevance. On April 8, 2020, SEC Chairman Jay Clayton and Division of Corporation Finance Director Bill Hinman issued a joint statement (the Statement) addressing these challenges and reaffirming the SEC’s long-held positions on earnings release disclosure.

In an effort to decrease the transmittal of COVID-19 by reducing person-to-person contact, and in recognition of the travel bans in place in several states, Delaware’s Governor John Carney issued an emergency order on April 6, 2020, relaxing notice requirements for changes in locations and dates of annual meetings in response to the threat of COVID-19.

The SEC’s staff in the Division of Corporate Finance issued a new C&DI on April 6, 2020, clarifying that registrants unable to incorporate Form 10-K Part III information by reference within the allotted 120-day window following the end of the filer’s fiscal year may use the 45-day relief granted by the SEC’s earlier COVID-19 Order (the Order) as long as the 120-day deadline falls within the relief period specified in the Order and the registrant meets the conditions of the Order. 

As the world continues to respond to the threat of COVID-19, financial markets and corporate constituencies are looking more closely at how environmental, social, and governance (ESG) considerations can help companies respond to the impact of COVID-19, both in the short term and long term, drive the re-imagination of global business models, and prevent crises in the future.

On March 31, 2020, the SEC released two new compliance and disclosure interpretations (CD&Is) clarifying how the SEC’s COVID-19 order, issued March 4, 2020 (the COVID-19 Order), which granted conditional relief to companies affected by coronavirus, interfaces with the standard Form 12b-25 notice for late filings.

With the COVID-19 pandemic rapidly evolving and driving down demand for crude oil along with planned production increases by Saudi Arabia, we’ve witnessed a dramatic decline in commodity prices. Many U.S. energy companies are now facing a perilous situation due to the prolonged effects of low commodity prices on their balance sheets and the uncertainty that they will be able to generate enough free cash flows required for operations and the service of debts.

On March 24, 2020, the SEC staff recommended to the Commission that, given the public health and safety concerns resulting from the coronavirus (COVIID-19), the requirements of Rule 302(b) of Regulation S-T be relaxed for those public companies affected. Rule 302(b) provides that each signatory of documents filed electronically with the SEC manually sign a signature page, or other document, authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic filing.

Following the conditional extensions issued earlier this month, the SEC announced further relief from upcoming reporting and delivery deadlines for public companies, funds, and investment advisors. The Division of Corporation Finance (the Division) also issued Disclosure Guidance Topic No. 9 providing guidance on disclosure obligations relating to COVID-19 business disruptions.

With the COVID-19 pandemic rapidly evolving and ever-changing, staying well-informed about corporate developments is vital for board effectiveness. The pandemic has caused the need for urgent yet thoughtful responses by corporations through their executive officers and boards of directors.

Much like March Madness fans, stockholders may not be able to score courtside seats to many of this year’s annual meetings. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and governments around the world have been ordering workers to stay home and banning large gatherings of people, even mandating “social distancing” to prevent the spread of the coronavirus. As companies enter the 2020 proxy season and plan their annual meetings, they should prepare for the possibility that their annual meetings may be forced into a virtual setting as stockholders, officers, and directors would not be able, or willing, to travel.

On March 9, 2020, the SEC ordered part of its staff based in Washington, D.C. to work from home following a possible exposure to coronavirus in its headquarters.

International events, such as Brexit and the 2007 global recession, often drive SEC disclosures by public companies, and the disease known as COVID-19 (the “Coronavirus”) is proving to be no exception. On March 4, the SEC advised all public companies to assess what the Coronavirus means for their future operations and financial results and to make appropriate disclosures to their shareholders and other members of the investment community.