The Impact of COVID-19 on disclosure of listed companies
In light of the impact of the COVID-19 pandemic, it is clear that listed companies need to take special note of their disclosure obligation . In this summary, you will find a list of frequently asked questions with brief answers, that are likely to be asked by listed companies and worth noting at this time.
Can companies assume any exemptions of regulations in light of the current uncontrollable external events?
Generally speaking, all listed companies still have a primary obligation to disclose all their insider information as soon as possible. As always, listed companies must assess whether the information available at company level would have a significant impact on the pricing of their shares if made public. In this regard, the rules on handling insider information should be noted, as well as the possibility of postponing disclosure, given that all conditions for postponement are met.
My company’s share price has dropped significantly. Does this provide any relief from the disclosure obligations?
Many companies will, understandably, think that their share price has been affected by the COVID-19 pandemic. It is common knowledge that the stock market globally has been severely affected by COVID-19. It seems that very few areas of industry remain unaffected. Despite this, listed companies have not been given any relaxations from their obligations to the market. The general impact on all companies is apparent but the listed companies must stay vigilant towards keeping the market up to date on how the situation may affect them in particular, as appropriate in each case. In relation to this, it is fitting to mention that the obligation to disclose insider information is equally valid where the information is likely to have a significant increase as well as a decrease on the share price of the respective company. It should be noted in particular whether there are any contracted provisions at the level of individual companies, which take situations such as now into account, e.g. derivative contracts, financing agreements or other.
What questions should listed companies be asking themselves in these times, considering duty to disclosure?
Listed companies should be asking questions around the real and possible effects of the pandemic, as well as their response thereto in terms of operations, finances and future prospects, including the current accounting period. These questions could involve any of the following, but each company should consider making an exhaustive list tailored to their business.
- Has information come to light, or do leaders expect information to come to light, which will significantly affect the company’s sales, when all factors are taken into account? Are the effects in line with market expectations?
- What effects have come to light, or what are the expected effects in terms of cash flow and liquidity in hand? Are the expected effects in line with market expectations?
- Is the company experiencing, or does the company expect to experience a significant impact on the supplies? What is the company’s ability to obtain resources from elsewhere? Are the effects in line with market expectations?
- How much indirect influence does the company face, taking into account the impact of COVID-19 on the company’s main counterparties, such as its general customers, suppliers, distributors, creditors or partners? Are there any such effects in excess of market expectations (including chain effects)?
- How has COVID-19 affected the company’s staff? How vulnerable is the company in this regard and what measures have been put in place to mitigate the impact?
- Is the company equipped to take on the challenges of COVID-19 and meet its legal obligations at the same time, e.g. in terms of GDPR (General Data Protection Regulation)?
- What are the company’s emergency plans should it be significantly affected by any of the above mentioned factors?
- Is the company vulnerable against any particular risk factors or has the company put any mitigating measures in place of which the market has not been informed?
It is key to capture and maintain a satisfactory understanding of the impact of COVID-19 on the company’s operations and financial position, and to consider to what extent this information would affect the exchange rate of its securities should it be made public, equally whether they would increase or decrease in value.
If you have any further questions, would like to enquire after more information or request counseling, please contact Ólafur Arinbjörn Sigurðsson, partner at LOGOS.