ASX has issued some helpful and pragmatic guidance in relation to continuous disclosure obligations in the COVID-19 environment. Key aspects of the guidance are:
- ASX recognises the challenges for listed companies in satisfying their disclosure obligations in this rapidly evolving and highly uncertain situation.
- The key issue remains that disclosure is required if the matter would have a material effect on the price or value of securities, unless it falls within certain exceptions.
- In some cases, it may not be possible for companies to make an announcement given the level of uncertainty, such as where the information is a matter of supposition or insufficiently definite to warrant disclosure, or there is not a clear and reasonable basis for making forward-looking statements.
- ASX recommends that companies, who have not already done so, carefully review any previously published guidance and if necessary update it, or more sensibly withdraw it given the highly uncertain climate. ASX does not expect companies to issue updated guidance in the current climate unless there is a clear and reasonable basis to do so. ASX notes that disclosure obligations "do not extend to predicting the unpredictable.
- Companies that make major operating decisions, such as standing down a material number of employees or closing or suspending operations or facilities, should disclose if it is likely to have a material effect on the price of value of its securities. Companies should not just disclose that it has happened but what the likely impact will be, including if possible to their financials.
- Companies in financial difficulties may also be required to make relevant disclosures, for instance if it is intended to appoint an administrator, or a major lender has declared an event of default and is seeking repayment of its loan.
- They have been quite a few companies that have announced the cancellation or suspension of dividends or other distributions that they had previously announced. ASX now says that in those circumstances the announcement should explain the legal basis for being able to make the cancellation, such as cancellation being authorised by the company's constitution. It has been a grey area whether all the companies who have cancelled dividends have had a proper legal basis to do so (see our earlier client alert here) and ASX is putting the onus on companies to positively confirm they have the relevant power or authority to do it. Interestingly, ASX expects that companies promptly make an ASX announcement if they don’t intend to pay a dividend where a dividend was paid in the previous corresponding period. This raises the bar for companies regarding their disclosure requirements.
- ASX is carefully scrutinising potentially misleading claims around COVID-19, such as announcements that a company's products kills the virus, or that it has developed a test, cure or treatment for the virus. ASX will zero in on these types of announcements to ensure that they are properly substantiated and not misleading. If it has concerns then ASX will move to immediately suspend trading.
Having regard to ASX 's updated disclosure guidance, listed companies should carefully consider if they need to make further disclosures, particularly if they have given financial guidance, to ensure the market is fully informed. They should also be careful to ensure that any such disclosures are complete, accurate and not misleading.
If you would like to draw from other global resources developed by Baker McKenzie on COVID-19, please visit our Coronavirus Resource Center.