Legal Alert

Form 8-K Disclosures – COVID-19 Impacts

by the Securities and Capital Markets Group
March 27, 2020

As a result of the operational and economic turmoil that has been caused by the global spread of COVID-19, many public reporting companies are considering disclosure obligations regarding the various ways the virus has impacted or could affect the company. In addition to the Form 8-K disclosures that are required if taking advantage of the recent filing extensions provided by the SEC and disclosures required if a company determines to convert its annual meeting to a virtual shareholder meeting, the following is a summary of the types of disclosures that reporting companies should consider.

Operational Disruptions

In response to global efforts to slow the spread of COVID-19, many reporting companies disclosed their decision to curtail, or in some cases halt, operations. The operational disruptions reported have included:

  • widespread retail store or hotel closures,
  • reductions in commercial flight capacity,
  • cancelation of major events, and
  • changes to delivery operations and/or capacity.

In addition, we are seeing disclosures regarding material breakdowns in supply chains or a decline in manufacturing and production capabilities. Finally, restructurings and major staffing changes, including reductions in staff or executive compensation cuts, may require disclosure on Form 8-K.

Financial Updates

As a result of the profound economic impact of COVID-19, reporting companies have disclosed a broad range of material changes to their financial health, including:

  • material adjustment to, or complete withdraw of, financial guidance,
  • adjustments to quarterly estimates to take into account operational changes, which in some instances have been positive due to an increased demand in certain sectors (such as companies that provide work from home technology solutions),
  • suspension of dividend payments or share buyback programs, and
  • entry into new lines of credit and debt instruments, renegotiation of existing indebtedness, draw down on existing credit facilities and other efforts to increase liquidity as a reaction to the uncertain economic climate or to maximize cash reach.

Supplemental Risk Factors

Many reporting companies that filed a Form 10-K, Form S-1 or other registration statement in the weeks before the COVID-19 outbreak became a global crisis have subsequently filed a Form 8-K to address additional risk factors that reflect the potential impact of COVID-19 on the previous disclosure or securities offering.

Forward-Looking and Safe Harbor Statements

With any Form 8-K, reporting companies should assess the need to include an applicable COVID-19 reference in forward-looking statements or safe harbor statements.

The members of Ballard Spahr’s Securities and Capital Markets Group advise private and public companies on compliance with reporting and disclosure obligations and the full range of business issues raised by COVID-19.

Copyright © 2020 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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