The COVID-19 pandemic has created a disclosure nightmare for public companies. The Securities and Exchange Commission (SEC) has recognized this challenge and, to its credit, has provided relief to public companies by, among other things, extending the deadline for companies to file certain disclosure reports. Nonetheless, companies are faced with the challenge of crafting disclosures regarding the risks presented by the coronavirus crisis to their business and operations and their plans for addressing those risks. This challenge is made all the more difficult by the looming presence of securities class action firms, which already have sued companies over coronavirus-related disclosures. In addition, the SEC in the recent past has charged companies for allegedly insufficient disclosures made in reaction to crisis situations.
The COVID-19 pandemic is wreaking havoc on the world economically. Businesses are being harmed in a myriad of ways, from losing customers, to supply chain disruptions, to employee layoffs. Many businesses and industries will change their operations in the short term and possibly permanently, while others will cease to exist. Public companies have a unique responsibility under federal securities laws to disclose information to the public, including assessments and plans relating to their business and operations and related risks. Such assessments and disclosures become thorny in the face of volatile markets, unprecedented events, and colossal business uncertainty.