Insight
In the last few days, the SEC, the NYSE, and the Governor of Delaware have offered public companies various types of relief in connection with the COVID-19 pandemic, along with disclosure reminders. Here are some highlights:
- On April 7, the SEC published updated guidance on disseminating proxy materials, including handling changes in meeting dates, location, and/or timing, including changes relating to holding virtual or “hybrid” meetings. While much of the SEC’s guidance remains unchanged, some aspects are new, including a hint that the SEC will be flexible in enforcing the 40-day notice of electronic availability for companies considering switching to a full notice-and-access approach to delivering proxy materials.
- Also on April 7, SEC Chair Jay Clayton stated, in an interview on CNBC, that companies need to disclose where they stand vis-à-vis financing, including the need for federal bailout funds or other sources of cash. He urged companies to provide disclosure at the earliest possible date on the need for cash; however, he also cautioned that until they are in a position to provide that disclosure, they need to keep a tight lid on the information in order to prevent leaks and insider trading.
- On April 7, the Governor of Delaware issued an emergency order addressing public companies incorporated in Delaware that may want or need to switch to a virtual annual meeting. In general terms, the order states that public companies that have already issued notices of meeting that switch to a virtual meeting will be in compliance with Delaware law if they issue a press release, post a notice or other communication on their websites, and otherwise comply with the recent SEC guidance (which includes filing the press release or other notice as additional proxy solicitation materials). The order does not apply to private companies or to public companies that have not yet issued notices of meeting. Those companies are presumably required to comply with the “usual” Delaware requirements applicable to changes in meeting location or adjournments (however, in the latter case, the meeting will have to commence as noticed if only to adjourn).
- On April 6, the New York Stock Exchange filed with the SEC a notice of immediate effectiveness of temporary waivers of shareholder approval requirements associated with issuing shares to a related party and issuing 20% of more of the outstanding common stock (other than a public offering for cash). As a result, NYSE-listed companies in need of cash due to the pandemic may be able to raise cash more easily. The waivers are subject to various conditions and currently expire on June 30, 2020. Nasdaq does not have comparable rules.
If you have any questions, please contact Gunster securities law and corporate governance practice leader Bob Lamm.
