Client Alert

Coronavirus (COVID-19): Preparing for Form 8-K Disclosures

01 Apr 2020

As the scale of the COVID-19 pandemic continues to expand, and government responses to and economic effects of the pandemic evolve, companies have had to grapple in real time with what, when, and how to communicate about the pandemic and its effects to stockholders, employees, regulators, and the public. In the US, public companies subject to the periodic and current reporting requirements of Sections 13 and 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), are responsible for filing Current Reports on Form 8-K to report, on a current basis, the occurrence of certain significant corporate events. The filing deadlines for Form 8-K are short, requiring companies to closely monitor whether any of the events that trigger a filing have occurred. Companies should ensure that their disclosure controls and procedures are effective in identifying Form 8-K triggering events as they arise so that disclosures can be made in a timely manner.

COVID-19 related disruptions to companies’ businesses and financial condition, new liquidity needs, and market volatility, among other events, can trigger reporting obligations under various Form 8-K items. Companies should keep in mind the following Form 8-K items that may be triggered in light of the current environment:

  • Item 1.01 – Entry into a Material Definitive Agreement. Companies may need to enter into new material definitive agreements in order to protect the business from potential shocks arising from the COVID-19 pandemic, such as entering into a new credit facility necessary for the company to maintain liquidity through the crisis. Companies may also need to make material amendments to existing material definitive agreements to address previously unforeseen circumstances arising from the COVID-19 pandemic, such as revising payment and other terms under a key lease. “Material” agreements are those that give rise to obligations that are material to and enforceable against the company, or rights that are material to and enforceable by the company against one or more parties to the agreement, in each case whether or not subject to conditions. This Item covers “definitive” agreements, but not non-binding term sheets or letters of intent. In addition, a material amendment to a material definitive agreement would also require a filing under this Item.
  • Item 1.02 – Termination of a Material Definitive Agreement. Disruptions due to COVID-19 may qualify as a force majeure event under a material definitive agreement of the company.[1] Terminations of material definitive agreements, due to invoking force majeure or other reasons, trigger a Form 8-K filing under this Item. For purposes of Item 1.02, “material definitive agreement” has the same meaning as that used in Item 1.01.
  • Item 1.03 – Bankruptcy or Receivership. Severe business disruptions due to COVID-19 could result in a company filing for bankruptcy. Under Item 1.03(a), a Form 8-K is required if a receiver, fiscal agent, or similar officer has been appointed for the company or its parent in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the company or its parent, or if such jurisdiction has been assumed by leaving the existing directors and officers in possession but subject to the supervision and orders of a court or governmental authority. Under Item 1.03(b), a Form 8-K is required if an order confirming a plan of reorganization, arrangement, or liquidation has been entered by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the company or its parent.
  • Item 2.02 – Results of Operations and Financial Condition. In order to inform the market, dispel market rumors, support capital raising transactions or for other reasons, a company may release preliminary information about a completed fiscal quarter in advance of its ordinarily scheduled earnings release date. The economic and market volatility caused by the COVID-19 pandemic in particular may motivate a company to undertake this kind of preannouncement of financial results. A Form 8-K is required under this Item when a company publicly releases material non-public information regarding its results of operations or financial condition for a completed quarterly or annual fiscal period. Disclosure under this item is triggered by a company providing preliminary information about a completed fiscal quarter, even when some of the amounts are estimates or a range of estimates.
  • Item 2.03 – Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. Companies may need to access liquidity under existing or new credit facilities as a result of lost revenues or other business disruptions due to COVID-19. Disclosure under this Item is triggered if the company becomes obligated on a direct financial obligation that is material to the company or if the company becomes directly or contingently liable for an obligation that is material to the company arising out of an off-balance sheet arrangement. Entry into a new credit facility and, in some circumstances, material drawdowns on an existing credit facility can trigger disclosure under this Item.
  • Item 2.04 – Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement. A filing under this Item would typically be required if a company is no longer in compliance with a covenant under a loan facility or similar agreement and such non-compliance triggers the increase or acceleration of a financial obligation or causes a contingent obligation to become a direct financial obligation. Companies should carefully review the covenants of existing debt instruments to avoid surprises due to covenant breaches arising from changes in the company’s financial condition, stock price, revenues, or other aspects of the company’s business due to COVID-19.
  • Item 2.05 – Costs Associated with Exit or Disposal Activities. A general economic contraction or company-specific business losses due to COVID-19 may cause a company to commit to an exit or disposal plan or otherwise dispose of assets or terminate employees. If a company commits to such a plan under which material write-offs or restructuring costs will be incurred, a filing would be required under this Item. This Item requires disclosure of (among other things) an estimate of the dollar amounts (either a total amount or a range of amounts) expected to be incurred for (i) each major type of cost, (ii) total costs, and (iii) cash expenditures. If the company is unable to make these estimates at the time the filing is due, this disclosure must be made in a subsequently filed amendment to the Form 8-K within four business days after the estimates are known.
  • Item 2.06 – Material Impairments. Rapidly changing and declining markets for equity securities and other assets may cause companies to assess if assets are impaired, including outside of their ordinarily scheduled processes for the preparation, review, or audit of financial statements. This Item is used to report any material charge for impairment to one or more of a company’s assets, including, without limitation, impairments of securities or goodwill required under generally accepted accounting principles applicable to the company. Material impairment charges requiring disclosure under this Item may occur in connection with an exit plan that requires disclosure under Item 2.05.

If a filing under this Item is required, the company must disclose: (i) the date of the conclusion that a material charge is required; (ii) a description of the impaired asset or assets; (iii) the facts and circumstances leading to the conclusion that the charge for impairment is required; (iv) the company’s estimate of the amount or range of amounts of the impairment charge; and (v) the company’s estimate of the amount or range of amounts of the impairment charge that will result in future cash expenditures. If the company is unable to estimate the amount of the charge or future expenditures related to the charge at the time of the Form 8-K filing, it must file an amendment to the Form 8-K within four business days after it makes a determination of such an estimate or range of estimates.

If the determination is made in connection with the preparation, review, or audit of financial statements required to be included in the company’s next quarterly or annual report under the Exchange Act, the company is permitted to make the disclosure in that periodic report, so long as the report is filed on a timely basis.

  • Item 3.01 – Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing. For companies that maintain a listing for a class of the company’s common equity on a national securities exchange (e.g., the New York Stock Exchange or the Nasdaq Stock Market), the effects of COVID-19 may cause the company to fail to satisfy a rule or standard for continued listing on the exchange. For example, significant volatility in stock prices as a result of COVID-19 may cause a company to fail to satisfy certain ongoing listing requirements related to a company’s stock price or market capitalization, as applicable.

A filing under this Item is required to report certain events related to the national securities exchange that maintains the principal listing for any class of the company’s common equity. Reportable events include the receipt of a notice from such exchange regarding the company or the company’s securities failing to satisfy a rule or standard for continued listing on the exchange. The filing deadline is calculated from the date on which the notice is received.

In a release on March 26, 2020, Nasdaq stated that “[w]hile at this time Nasdaq has not sought to suspend any Listing Rules, we are closely monitoring the impact of COVID-19, including the resultant market volatility, on Nasdaq-listed companies.”[2] Nasdaq emphasized that “[c]ompanies newly deficient with the bid price, market value of listed securities, or market value of public float requirements have at least 180 days to regain compliance and may be eligible for additional time. Companies that no longer satisfy the applicable equity requirement can submit a plan to Nasdaq Listing Qualifications describing how they intend to regain compliance and, under the Listing Rules, Listing Qualifications’ staff can allow them up to six months to come back into compliance with the requirement.” Companies may want to contact the listing departments of the exchanges, as applicable, to discuss situations specific to the company that may warrant an exception to the exchange’s rules.

  • Item 3.02 – Unregistered Sales of Equity Securities. Companies may need to engage in private placements to raise capital for liquidity needs as a result of the crisis. If the company sells equity securities in a transaction that is not registered under the Securities Act of 1933, as amended (the “Securities Act”), it would use this Item to disclose: (i) the date of the sale; (ii) the title and amount of securities sold; (iii) the consideration paid for the securities; (iv) which exemption from registration the company has relied upon; and (v) if the securities are exchangeable or exercisable for equity securities of the company, the terms of exchange or exercise.

The obligation to make a disclosure under this Item is triggered when the company enters into an agreement enforceable against the company, whether or not subject to conditions, under which the equity securities are to be sold. If there is no such agreement, the company should file the Form 8-K within four business days after the closing of the transaction.

The company does not need to file a Form 8-K if the equity securities sold, in the aggregate since its last Form 8-K (if filed under this Item 3.02) or its last periodic report, whichever is more recent, constitute less than 1% of the number of outstanding shares of the class of equity securities sold. This threshold is 5% for smaller reporting companies.

  • Item 3.03 – Material Modifications to Rights of Security Holder. Material modifications of instruments defining the rights of the holders of any class of registered securities, for example in the context of a workout necessitated by a company being unable to repay debts due to the impact of COVID-19, may require disclosure under this Item. Item 3.03(a) provides that if the constituent instruments defining the rights of the holders of any class of registered securities of the company have been materially modified, the company must disclose: (i) the date of the modification; (ii) the title of the class of securities involved; and (iii) a brief description of the general effect of such modification upon the rights of holders of such securities. Item 3.03(b) provides that if the rights evidenced by any class of registered securities have been materially limited or qualified by the issuance or modification of any other class of securities by the company, the company must disclose: (i) the date of the issuance or modification; and (ii) a brief description of the general effect of the issuance or modification of such other class of securities upon the rights of the holders of the registered securities. An instruction to Item 3.03 indicates that working capital restrictions and other limitations upon the payment of dividends must be reported pursuant to this Item 3.03.
  • Item 5.02 – Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. The economic and business effects of COVID-19 may necessitate changes to the compensation arrangements of a company’s executive officers. Entry into (or amendment of) a material compensatory arrangement with a principal executive officer, principal financial officer, or named executive officer would trigger disclosure under this Item. Further, if the company’s principal executive officer, president, principal financial officer, principal accounting officer, principal operating officer, or any person performing similar functions, or any named executive officer, is incapacitated due to COVID-19 and has his or her duties and responsibilities removed or turned over to others within the company on a temporary basis so that he or she no longer functions in that position, the company would need to report that change pursuant to Item 5.02(b), as discussed in Question 117.03 and Interpretation 217.02 of the Division of Corporation Finance’s Exchange Act Form 8-K Compliance and Disclosure Interpretations.[3] If a principal executive officer, president, principal financial officer, principal accounting officer, principal operating officer, or any person performing similar functions is appointed on a temporary or permanent basis to replace an executive who is incapacitated due to COVID-19, a Form 8-K must be filed pursuant to Item 5.02(c), consistent with Interpretation 217.02 of the Exchange Act Form 8-K Compliance and Disclosure Interpretations. An Item 5.02(b) Form 8-K is not required if the company’s principal executive officer, president, principal financial officer, principal accounting officer, principal operating officer, or any person performing similar functions, or any named executive officer, dies as a result of COVID-19, as discussed in Interpretation 217.04 of the Exchange Act Form 8-K Compliance and Disclosure Interpretations; however, the company may need to consider other disclosure obligations when determining whether the death should be disclosed.
  • Item 5.08 – Shareholder Director Nominations. Companies may need to make changes to annual shareholder meetings because of concerns about COVID-19, including, in some cases, an inability to hold an annual meeting as planned due to local restrictions on public gatherings. The U.S. Securities and Exchange Commission (SEC) provided guidance regarding potential changes to the date, time, location, or format of upcoming annual meetings of shareholders.[4] In addition, companies should keep in mind that if the date of the annual meeting has been changed to a date that is more than 30 calendar days from the same date as the previous year’s meeting, then the date by which shareholder nominations for directors must be submitted must be disclosed under this Item.
  • Item 7.01 – Regulation FD Disclosure and Item 8.01 – Other Events. Companies can use these Items to furnish or file information about developments as they arise. Companies have used these Items to report the suspension or cancellation of share repurchase programs, to disclose significant business disruptions such as store closures or product delays, and to provide new or updated risk factor disclosures or an updated management’s discussion and analysis of financial condition and results of operations disclosure, among other information about the impact of the COVID-19 pandemic. Information provided under Item 7.01 of Form 8-K is considered to be “furnished” and not “filed.” Information that is “furnished” to the SEC is not subject to liability under Section 18 of the Exchange Act, and is not incorporated by reference into any filings made under the Securities Act unless expressly stated.

Given the rapidly evolving effects of COVID-19 on companies’ business and operations, companies should make sure that management, legal, and other key personnel are aware of the events that may trigger reporting obligations and remain vigilant and communicate promptly as facts arise that may require a Form 8-K filing.


[1] See our client alert, Excusing Performance in the Wake of Coronavirus (COVID-19), available at https://www.mofo.com/resources/insights/200320-excusing-performance-covid-19.html.

[2] Information for Nasdaq Listed Companies about the Impact of Coronavirus (COVID-19), available at https://listingcenter.nasdaq.com/assets/Listing%20Center%20Coronavirus%20FAQs%20for%20Nasdaq-listed%20Companies.pdf.

[3] Division of Corporation Finance, Exchange Act Form 8-K Compliance and Disclosure Interpretations, available at https://www.sec.gov/divisions/corpfin/guidance/8-kinterp.htm.

[4] See our client alert, SEC Guidance on Annual Meeting Changes Due to COVID-19, available at https://www.mofo.com/resources/insights/200318-sec-guidance-annual-meeting-changes-covid-19.html.

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