Updates to SEC Guidance on Shareholder Meetings and Filing Deadlines; NYSE and Nasdaq Provide Temporary Suspension of Continued Listing Requirements
04.05.2020 | Client Alert
Since we first reported on Securities and Exchange Commission COVID-19-related relief and guidance regarding shareholder meetings and filing deadlines, the SEC staff has further updated its relief and guidance for public company shareholder meetings, and extended its 45-day filing deadline relief for Exchange Act periodic and current reports through July 1, 2020 and issued further interpretations related to these extended deadlines. Further, both the New York Stock Exchange and Nasdaq have now issued temporary suspensions of certain of their continued listing requirements. The latest developments are described below. To keep up with future changes, please subscribe to our SEC Pulse blog.
SEC Updates to Guidance on Shareholder Meetings and Annual Meetings
In March, the SEC had issued guidance and relief from filing conditions for companies considering switching to virtual shareholder meetings or delaying their meetings after their initial proxy materials had been sent. In the updated guidance in April, among other things, the SEC provides further relief from some of the requirements for companies switching from “full set delivery” (i.e., physical mailing of all proxy materials), due to delays in printing and mailing as a result of the impact of the COVID-19 pandemic, to “notice and access” (i.e., physical mailing of only a notice of availability of online proxy materials), including relaxing the normal requirement for the notice of availability of proxy materials to be mailed at least 40 calendar days before the applicable shareholder meeting where unavoidable delays in printing and mailing make that time requirement not feasible. The updates also make clear that the guidance applies to special meetings of shareholders, not just annual meetings.
SEC Extends 45-Day Filing Relief Through July 1, 2020
On March 25, 2020, the SEC issued an order that extended its prior order granting relief from SEC key filing deadlines for periodic and certain other reports. The updated order now covers filings due on or before July 1, 2020, and supersedes the prior order. All Exchange Act periodic and current reports are covered by the March 25 order, including, but not limited to, Forms 10-K, 10-Q and 8-K, as well as proxy and information statements.
If a company believes that it is unable to meet the filing deadline due to circumstances related to COVID-19, then the company is permitted to delay such filing 45 calendar days from the original due date if it files a Form 8-K (or if eligible, a Form 6-K) by the original deadline of the report that discloses:
- that it is relying on the March 25 order;
- a brief description of why it could not file the report on a timely basis;
- the estimated date by which the report is expected to be filed;
- a company specific risk factor or factors explaining the impact, if material, of COVID-19 on its business; and
- if the reason the report cannot be filed relates to the inability of any person, other than the company, to furnish any required opinion, report or certification, the Form 8-K or Form 6-K must attach as an exhibit a statement signed by such person stating the specific reasons why such person is unable to furnish the required opinion, report or certification.
When the filing is made by the 45-day deadline, the company must include in such filing the reasons why it could not file on a timely basis. A separate Form 8-K or Form 6-K disclosing the conditions above must be made for each filing that is delayed.
Delayed Filings – Form 12b-25 Implications
A company that is unable to meet the filing deadline for certain Exchange Act reports, including Forms 10-K and 10-Q, typically must file a Form 12b-25, which provides an extended period of time by which to make the filing. On March 31, 2020, the SEC announced interpretive positions addressing how the filing of Form 12b-25 could be implicated by the March 25 order. The SEC has made clear that any company relying on the March 25 order would not need to file a Form 12b-25 so long as the filing is made within the 45-day time period. The SEC further clarified that a company that is unable to meet the 45-day deadline can rely on Rule 12b-25 to obtain a further extension, since reliance on the March 25 order results in a due date 45 days after the original filing deadline for the report. On the other hand, a company that filed a Form 12b-25 may not subsequently rely on the March 25 order, since one of the conditions of the March 25 order requires that the company furnish a Form 8-K or Form 6-K by the original due date of the filing.
Impact of March 25 Order on Ability to Incorporate Form 10-K Part III Information by Reference from Proxy or Information Statement
On April 6, 2020, the SEC announced additional interpretive positions addressing the impact of the March 25 order on the ability to incorporate by reference from a company’s definitive proxy or information statement into Part III of its Form 10-K. Form 10-K allows Part III information to be incorporated by reference from a company’s definitive proxy or information statement, or, under certain circumstances, filed as an amendment to the Form 10-K, not later than 120 days after the end of the related ﬁscal year. The SEC clarified that a company that is unable to file the Part III information by the 120-day deadline is permitted to avail itself of the relief provided by the March 25 order for the filing of the Part III information, as long as the 120-day deadline falls within the relief period specified in the March 25 order and the company meets the conditions of the March 25 order.
The SEC’s interpretive guidance also states that a company that timely filed its annual report on Form 10-K without relying on the March 25 order is permitted to rely on the March 25 order for the filing of the Part III information by furnishing a Form 8-K with the disclosures required in the March 25 order (discussed above) by the 120-day deadline. The company would then need to provide the Part III information within 45 days of the 120-day deadline by including it in a Form 10-K/A or definitive proxy or information statement.
A second option is that a company may invoke the March 25 order with respect to both the Form 10-K and the Part III information by furnishing a single Form 8-K by the original deadline for the Form 10-K that provides the disclosures required by the March 25 order, indicates that the company will incorporate the Part III information by reference and provides the estimated date by which the Part III information will be filed. The Part III information must then be filed no later than 45 days following the 120-day deadline. A company that properly invoked the March 25 order with respect to its Form 10-K by furnishing a Form 8-K but was silent on its ability to timely file Part III information may (a) include the Part III information in its Form 10-K filed within 45 days of the original Form 10-K deadline, or (b) furnish a second Form 8-K with the disclosures required in the March 25 order by the original 120-day deadline and then file the Part III information no later than 45 days following the 120-day deadline by including it in a Form 10-K/A or definitive proxy or information statement.
NYSE and Nasdaq Propose Temporary Suspension of Certain Continued Listing Requirements
The SEC recently approved a proposal by the NYSE to suspend the application of the NYSE continued listing requirement with respect to its market capitalization standard (described below) until June 30, 2020. NYSE listing standards provide that a NYSE-listed company will not be in compliance with this continued listing standard if the company’s average global market capitalization over a consecutive 30 trading-day period is less than $50 million and, at the same time, stockholders’ equity is less than $50 million. Notwithstanding, NYSE would promptly initiate suspension and delisting procedures with respect to a listed company if such company is determined to have average global market capitalization over a consecutive 30 trading-day period of less than $15 million. During the NYSE suspension period, which has now been approved by the SEC, companies will not be notified of new events of noncompliance with the market capitalization standard.
On April 3, 2020, NYSE filed with the SEC another proposed rule change to suspend the application of its $50 million market capitalization and $1.00 price continuing listing requirements through June 30, 2020, although so far this application has been rejected by the SEC.
The SEC also recently approved a proposal by Nasdaq to permit a longer period of time for Nasdaq-listed companies to regain compliance with its bid price and market value of publicly held shares continued listing requirements by tolling the compliance periods through and including June 30, 2020. Nasdaq continued listing requirements provide that a company’s primary equity securities that are listed on The Nasdaq Global Market or The Nasdaq Capital Market, and the company’s preferred stock or secondary class of common stock, must maintain a minimum bid price of at least $1 per share. Nasdaq continued listing requirements also provide that a company’s publicly held shares must maintain a minimum market value, which ranges from $1 million to $15 million, depending on factors such as the type of security and whether the securities are listed on The Nasdaq Global Market or The Nasdaq Capital Market.
Both suspensions are intended to help companies that have been adversely affected by the COVID-19 pandemic, which for many companies has resulted in the reduction, or complete interruption, in revenue and the significant decline in stock price.