SEC Disclosure in the Time of COVID-19

March 20, 2020

The industry has seen a number of Securities and Exchange Commission disclosure-related developments affecting public companies during the outbreak of the novel coronavirus (COVID-19), including:

  • SEC guidance on conducting annual meetings
  • Proxy advisory firm adjustments for virtual annual meetings
  • Disclosure obligations to consider in the COVID-19 pandemic
  • SEC’s exemptive order relating to coronavirus
  • Insider trading policy considerations
  • Board oversight of the company’s COVID-19 response

Read on for an overview of each, including analysis and implications for public companies.

SEC Staff Guidance on Conducting Annual Meetings

On March 13, 2020, the SEC staff (not just the staff of the Division of Corporation Finance) issued guidance for conducting annual shareholder meetings in the time of the coronavirus pandemic that address (1) disclosing changes in the date, time or location of the annual meeting; (2) conducting virtual meetings; and (3) presenting shareholder proposals.

Noting that issuers are contemplating possible changes in their annual meetings due to the difficulties arising from COVID-19, the SEC staff advised that, from a federal securities law perspective, any issuer that has already mailed and filed its definitive proxy materials may notify shareholders of a change in the date, time and location of its annual meeting without mailing additional soliciting materials or amending its proxy if it:

  1. issues a press release announcing the change in date, time or location of the meeting;
  2. files the announcement as “additional soliciting materials” on EDGAR; and
  3. takes all reasonable steps necessary to inform other intermediaries in the proxy process (such as any proxy service provider) and other relevant market participants (such as the appropriate national securities exchanges) of such change.

The SEC staff also advised registrants considering a virtual-only or “hybrid” (i.e., simultaneously in-person and virtual) annual meeting to provide notice of such meeting format to shareholders in a timely manner with clear directions of how to participate in such meeting. Issuers that have already filed and mailed their definitive proxy materials are allowed to follow the three steps noted above to announce these details to shareholders and other participants, rather than mailing this information to shareholders.

The guidance also encouraged issuers, to the extent feasible under state law, to provide shareholder proponents or their representatives with the ability to present their proposals at the annual meeting through alternative means, such as by phone, during the 2020 proxy season. Note that this SEC guidance relates to federal securities law compliance matters only, and is subject to applicable state law considerations and consultation with local counsel.

Proxy Advisory Firm Responses to COVID-19

The proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis have each updated their proxy voting guidelines in light of the COVID-19 outbreak. Many shareholder advisory groups and institutional investors have policies that disfavor virtual meetings. However, each of ISS and Glass Lewis has issued guidance that it expects shareholders to be more accommodating of hybrid and virtual annual meetings this year in light of the pandemic, but also expects companies to provide comprehensive disclosures in their proxy materials affirming the rights of shareholders to participate in meetings. Other corporate governance groups have cautioned that any exemptions be limited to the current crisis and not set precedent for future years.

Ongoing Disclosure Obligations

As the financial and operational impacts of the COVID-19 pandemic continue, public companies must consider how their disclosures should change to inform investors about these impacts. SEC Chairman Jay Clayton noted in January 2020 remarks that the impact of COVID-19 is an “uncertain issue where actual effects will depend on many factors beyond the control and knowledge of issuers. However, how issuers plan for that uncertainty and how they choose to respond to events as they unfold can nevertheless be material to an investment decision.” Some of the disclosures that may require updating, particularly for companies that are accessing the public markets, include the following:

1. Earnings or Revenue Guidance

Generally, there is no obligation to update guidance for interim results or events. However, companies that have issued guidance on their expected financial results should consider whether to modify, suspend or withdraw guidance due to the expected financial impact of the pandemic, particularly if the company has closed stores or factories, experienced supply chain interruptions or had to take other actions having a material impact on projected financial results. Companies may also consider whether it would be appropriate to wait to adjust guidance until they have more information to impart to investors or until the company is at the point in the reporting cycle when it would typically comment on existing guidance.

2. 8-K Filings

Companies are required to file current reports on Form 8-Ks only if an event occurs that falls within one of the enumerated triggering events called for by Form 8-K. Companies are advised to consult with counsel on whether a specific event related to the COVID-19 outbreak would trigger an 8-K obligation. To the extent a plant or business center is shut down, and the shutdown is material to the company as a whole after considering applicable business continuity measures, registrants should consider whether to file a “voluntary” Form 8-K (via Item 8.01).

3. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

In their Form 10-Ks, registrants are required to discuss any “known trends or uncertainties” that will impact, favorably or unfavorably, the liquidity, capital resources or results of operations of the registrant. In their Form 10-Qs, each quarter, registrants are required to disclose any material changes in these events. In light of the COVID-19 crisis, companies should consider how to best describe to investors the impacts on liquidity, capital resources and results of operations a prolonged health crisis might have. Such considerations could include reduced access to credit or material changes in the cost of accessing the capital markets (or an inability to access the capital markets). To the extent that a registrant has publicly disclosed in a 10-K its thoughts on trends impacting liquidity, capital resources or results of operations, if those disclosures need to be updated in light of the COVID-19 pandemic, the registrant should be sure to make corresponding changes in subsequent 10-Qs.

4. Proxy Statements

Any company that has not yet filed its annual meeting proxy statement may want to review it, particularly disclosures about the time, date and location of the meeting (i.e., virtual meeting considerations), 2020 expectations that might be included in a CEO letter to shareholders, and future outlook described in the Compensation Discussion & Analysis, to determine whether those disclosures might need updating for the pandemic and its potential impact on the company’s business and stakeholders.

5. Risk Factors

Registrants are required to include comprehensive risk factors in their annual reports on Form 10-K and disclose material changes to these risk factors on their quarterly reports on Form 10-Q. The SEC staff has repeatedly emphasized that a registrant’s risk factors should be specifically tailored to the circumstances of the company and the risk factors should discuss why an investment in the company’s securities could be risky. Accordingly, registrants should consider, among others, the following risks posed by the COVID-19 pandemic to a registrant’s business:

  • Supply chain disruptions
  • Loss of contracts or customers
  • Closure of stores/facilities
  • Travel disruptions
  • Government responses
  • International business risks
  • Significant operations in countries severely impacted by the pandemic
  • Loss of human capital or personnel
  • Interruption of production

In addition, registrants that already have a force majeure or similar risk factor that mentions public health crises should consider making sure that the risk factor is narrowly tailored to the specific risks of the company. In addition, companies should consider whether to include a specific COVID-19-related risk factor. Where the registrant is actually experiencing the events in a risk factor, it would not be appropriate for the risk factor to use wording that implies that the risk factor event has not happened yet.

6. Forward-Looking Statements

When issuing forward-looking information, to comply with the safe harbor in the Private Securities Litigation Reform Act of 1995, registrants must include meaningful cautionary statements identifying items that could cause their results to be materially different from those presented. Consequently, registrants should consider updating their forward-looking information to highlight potential impacts caused by the COVID-19 pandemic. This applies to not only Form 10-Ks, 10-Qs and 8-Ks, but also press release disclaimers.

7. Subsequent Events Disclosures

A potentially overlooked area for legal disclosure for public companies is the footnotes to financial statements, where disclosure may need to be included if the COVID-19 pandemic constitutes a “subsequent event” under Accounting Standard Codification (ASC) 855-10-20. Under ASC 855-10-20, a subsequent event is one that occurs after a balance sheet date but before the date financial statements are issued. This potential disclosure was also highlighted in a recent joint public statement by the SEC and PCAOB chairs, the director of the SEC’s Division of Corporation Finance and the SEC chief accountant, where the group discussed the potential exposure of companies to the effects of the COVID-19 pandemic and how such exposure could impact financial disclosures and audit quality.

8. Impairments

Companies may need to consider whether the impact of the pandemic may have impaired any assets (including goodwill) or was a triggering event for an impairment test. The financial performance of certain lines of business or other assets, including estimates of future cash flows and earnings, may be significantly affected by the direct or indirect impacts of COVID-19 events. These accounting determinations may require Form 8-K disclosure. Indicators of impairment include (but are not limited to) significant changes with an adverse effect on the entity that have taken place during the period, or will take place in the near future, in the (1) market or economic environment in which the entity operates; and (2) extent to which, or the manner in which, an asset is used or is expected to be used (for example, an asset becoming idle, plans to discontinue or restructure the operation to which an asset belongs, or plans to dispose of an asset before the previously expected date).

9. Internal Controls Over Financial Reporting

Registrants should consider how the coronavirus health crisis could impact their internal controls over financial reporting, including with respect to how such impact would need to be disclosed in public reports. Issues to be considered may include potential delays in completing testing, audits or financial statements due to personnel shortages or travel restrictions, and testing and analysis for “going concern.”

SEC Exemptive Order Relating to Coronavirus

Noting that disruptions to transportation and limited access to facilities, support staff and professional advisers as a result of COVID-19 could hamper the efforts of public companies to meet their filing deadlines, on March 4, 2020, the SEC staff announced conditional regulatory relief for certain public filing obligations. During the period from March 1, 2020, to April 30, 2020, registrants are exempt from certain filing requirements if the following conditions are met: the registrant (1) is unable to meet a filing deadline due to circumstances related to COVID-19, and (2) furnishes a Form 8-K (or, if eligible, a Form 6-K) by the later of March 16 or the original filing deadline of the report being delayed. This Form 8-K or 6-K must state all of the following:

  1. That the registrant is relying on the SEC’s exemptive order.
  2. A brief description of why the registrant cannot file the report on time.
  3. The estimated date by which the delayed report is expected to be filed.
  4. If appropriate, a risk factor explaining, if material, the impact of COVID-19 on the registrant’s business.
  5. If the reason the report cannot be filed timely relates to the inability of any person other than the registrant (such as a law firm or accounting firm) to furnish any required opinion, report or certification, the 8-K or 6-K must include as an exhibit a statement signed by such person stating the reasons why such person is unable to furnish the required opinion, report or certification on time.

Examples of reports that are potentially subject to this exemptive order include Forms 10-K, 10-Q and 8-K, and amendments thereof, as well as definitive proxy statements and related soliciting materials and amendments thereto, and Schedule 13Gs and amendments. Filings not covered by the exemptive order are Section 16 beneficial ownership reports on Forms 3, 4 and 5, and Schedule 13D filings or amendments to a previously filed Schedule 13D. For details, read the full text of the SEC’s exemptive order.

Insider Trading Concerns

Companies should also consider how potential effects from the COVID-19 outbreak on their business could constitute material nonpublic information. Insiders will likely have greater insight on how COVID-19 will affect a company’s business and financial results. It may be appropriate to close the trading window under the insider trading policy until the company has informed the public of material information related to the impact of the COVID-19 health crisis.

Board Oversight Concerns

During these uncertain times, it is particularly important for a public company board to exercise appropriate oversight of the company and its responses and plans to address the effects of the pandemic. Each company should ensure that management is regularly reporting to the board about the impact of COVID-19 on the company’s employees, customers, supply chain, financing and capital market activities, and liquidity, access to credit and other key resources. In addition, a company’s board and management should be in regular consultation about the effect of the pandemic on the company’s financial results and the company’s ongoing plans to address future effects of COVID-19. This may include discussing communication plans and crisis protocols in light of “social distancing” or “shelter in place” requirements or recommendations from government authorities or potential illness or quarantine affecting senior management or directors. Finally, companies should prepare to conduct future board or committee meetings remotely, especially if their directors are in “at-risk” cohorts.


The COVID-19 outbreak and its impact on the economy and public companies continue to evolve at unprecedented speed. As companies struggle with macro-economic shocks and work to keep their employees, customers and other stakeholders healthy, they should not neglect their ongoing disclosure requirements to the investing public. They should also bear in mind recent guidance from the SEC and proxy advisory firms, should consider potential insider trading concerns with insider-held securities, and should ensure that their boards of directors are kept abreast of all material developments to the company.

The McGuireWoods securities and capital markets department comprises more than 50 lawyers who specialize in corporate governance and SEC disclosure considerations of the sort described in this client alert. Please contact any of the authors below for additional information.