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Yesterday, Corp Fin issued 3 new CDIs arising out of the new mining company property disclosure rules – Broc blogged about the rules when they were adopted in 2018.  The CDIs address when companies need to comply with the new rules and also incorporation of such disclosure by reference to an annual report.  Here they are:

Question 155.01

Question: For purposes of filing an Exchange Act annual report, when must a registrant engaged in mining operations comply with the new mining property disclosure rules set forth in Subpart 1300 of Regulation S-K?

Answer: A registrant engaged in mining operations must comply with Subpart 1300’s disclosure rules beginning with its Exchange Act annual report for the first fiscal year beginning on or after January 1, 2021. Until then, staff will not object if the company relies on the guidance provided in Guide 7 and by the Division of Corporation Finance staff for the purpose of filing an Exchange Act annual report. [April 29, 2020]

Question 155.02

Question: For purposes of filing a Securities Act registration statement, may the registrant satisfy its obligation to include mining property disclosure pursuant to Subpart 1300 of Regulation S-K by incorporating such disclosure by reference to its Exchange Act annual report for the appropriate period, even if such annual report was not required to comply with the new mining property disclosure rules in Subpart 1300 of Regulation S-K?

Answer: Yes. Until annual financial statements for the first fiscal year beginning on or after January 1, 2021 are required to be included in the registration statement, the staff will not object if a Securities Act registration statement incorporates by reference disclosure prepared in accordance with Guide 7 from an Exchange Act annual report for the appropriate period filed by a registrant engaged in mining operations if otherwise permitted to do so by the Commission’s rules on incorporation by reference. See, e.g., Securities Act Rule 411 (17 CFR 230.411), which provides that information must not be incorporated by reference in any case where such incorporation would render the disclosure incomplete, unclear, or confusing. [April 29, 2020]

Question 155.03

Question: For purposes of filing an Exchange Act or Securities Act registration statement that does not incorporate by reference mining property disclosure from a registrant’s Exchange Act annual report, when must a registrant engaged in mining operations comply with the new mining property disclosure rules set forth in Subpart 1300 of Regulation S-K?

Answer: An Exchange Act or Securities Act registration statement that does not incorporate by reference mining property disclosure from an Exchange Act annual report filed by a registrant engaged in mining operations must comply with the new mining property disclosure rules set forth in Subpart 1300 of Regulation S-K on or after the first day of the first fiscal year beginning on or after January 1, 2021. For example, a calendar year-end company would be required to comply with the new mining property disclosure rules when filing an Exchange Act registration statement or a Securities Act registration statement that does not incorporate by reference disclosure from a registrant’s Exchange Act annual report on or after January 1, 2021, while a registrant with a June 30^th fiscal year-end would be required to comply with the new mining property disclosure rules when filing an Exchange Act registration statement or a Securities Act registration statement that does not incorporate by reference disclosure from a registrant’s Exchange Act annual report on or after July 1, 2021. [April 29, 2020]

Covid-19: Going Concern Uncertainties

A recent Audit Analytics blog says that going concern uncertainties will likely see an uptick due to fallout from Covid-19 but so far anyway, it hasn’t been significant.  Here’s an excerpt of the most current information from Audit Analytics:

As of April 20, 2020, there have been 16 audit opinions on annual reports for SEC filers that have cited the COVID-19 pandemic as a contributing factor to substantial doubt about a company’s ability to continue as a going concern for the next twelve months.  Of those going concern opinions, 11 are repeat going concerns.

For the five companies with new going concerns for fiscal year 2019, the impacts of the COVID-19 pandemic are expected to have a material adverse effect on results of operations, cash flows, and liquidity. However, three of these companies had certain pre-existing uncertainties prior to the pandemic – such as debt covenant obligations, recurring operating losses and negative operating cash flows – so it’s not surprising that impacts from the coronavirus would contribute additional uncertainty, resulting in substantial doubt about their ability to continue as a going concern.

No doubt Covid-19 will likely impact going concern issues for companies already dealing with financial challenges.  And given the current economic environment, it seems the numbers are sure to change as the Covid-19 impact will be felt by companies in other industries that historically haven’t experienced going concern issues.

Former Chief Justice Strine Joins Wachtell, Lipton, Rosen & Katz

It was a just a couple of weeks ago that I blogged about Former Delaware Chief Justice Strine’s latest call for another “new deal.”  He’s on the move – earlier this week Wachtell Lipton announced that he’s joined the firm and the NYTimes DealBook column carried the news too.  Here’s an excerpt from the firm’s announcement:

Explaining his decision to join Wachtell Lipton, Mr. Strine said: “As a judge, I thought the importance of corporations in our society could not be measured by their stock price, and that it was critical to our nation’s well-being that powerful businesses treat their workers and consumers well, support the communities in which they operate, and focus on environmentally responsible, sustainable wealth creation.” Noting that “for more than two generations, Wachtell Lipton has been a consistent voice on behalf of that viewpoint and has embedded it in how it treats its people, and how it assists clients,” Mr. Strine concluded that the Firm would be “a great institution for me to help to put into practical application principles I believe are vital to our economy working for everyone.”

– Lynn Jokela