Barnea Jaffa Lande: Last week, the Israel Securities Authority published an announcement on the conduct and disclosures required of corporations that report to the Tel Aviv Stock Exchange on the impact of the coronavirus on their business. We note that the spread of the virus poses significant business challenges to corporations in the capital market.
In the announcement, the ISA staff states that any corporation whose business activity is materially impacted or may be materially impacted by the virus must ensure this is properly disclosed to investors. This must be done through the following means: (a) publishing an immediate report, (b) providing a disclosure as part of the board of directors’ explanation in periodical reports, and (c) estimating the scope of the impact of the events both qualitatively and quantitatively.
The ISA emphasized that reporting corporations must present information on the impact of the virus in a clear, detailed, non-selective manner, thereby enabling investors to assess the impact optimally and sensibly.
In addition, reporting corporations must ensure they are able to continue to publish reports for the market in a timely manner, as required by law.
It is interesting how substantially different the relatively strict policy for reporting corporations laid out by the ISA is from the policy of the US Securities and Exchange Commission, which several days prior to the ISA’s announcement published an order allowing leniency in reporting schedules for public companies hit by the virus.
Under the US order, subject to certain conditions, US publicly traded companies impacted by the virus will receive a 45-day extension in submitting the reports they are required to publish during the period between early March and the end of April 2020. These include, inter alia, the expanded annual reports and summons to shareholders’ meetings.
However, it should be noted that even the SEC, like the ISA, emphasized the importance of providing to investors full disclosure on the impact of the virus on the activity of US publicly traded companies, in a detailed and non-selective manner.
Thus, there appears to be no dispute that the ISA acted properly when stating in its announcement that reporting corporations must provide full disclosure on the impact of the virus in order to allow investors to best evaluate that impact. Nevertheless, the ISA should afford some consideration, as the SEC did, to reporting corporations in terms of extending the date for publishing expanded reports, insofar as a delay is due to health concerns that make timely preparation of such reports difficult.
Barnea Jaffa Lande is a commercial law firm in Israel.