Due to the COVID-19 pandemic, the Australian economy has been blindsided. Our sharemarket has been pummelled. Some listed companies currently can’t trade, and they face additional shareholder considerations.
What COVID-19 information do I need to disclose to shareholders?
ASX Listing Rule 3.1 deals with a listed company’s obligation to give shareholders immediate notice of material information. As soon as your company becomes aware of any information which may affect the share price, it must tell ASX immediately. There are some exceptions to this, for example:
- The disclosure would break the law
- The disclosure concerns information which is insufficiently definite (this includes information which is so vague, embryonic or imprecise it may mislead or misinform the market)
- The disclosure contains information which is a trade secret
Although COVID-19 has caused deep uncertainty, your company must continue to manage its disclosure obligations.
You’re not required to disclose information which falls under the exceptions in Listing Rule 3.1. However, a word of caution. You shouldn’t assume you’re relieved of disclosure obligations because COVID-19 has caused your company’s share price to drop.
If you know your company must make a disclosure due to the impact of COVID-19, but you’re uncertain how it will affect your company, we recommend you:
- Make a general announcement to the market; and
- Confirm you’ll make a further announcement when the impact is known
The announcement should be made as soon as possible.
However, a general announcement may not be enough if your company:
- Is at risk of suffering cash shortage; or
- Needs to make material changes to its business plan to survive
Your company will need to make an assessment of the certainty of the changes required so you can work out how much information should be disclosed.
In the COVID-19 climate, such disclosures may include:
- Interruptions to the company’s supply chain
- Impact of any government response to COVID-19
- Strategic plans for company survival in the current uncertainty
- Infection of any members of the company’s workforce, or the impact of any workforce infections
- Trigger of a force majeure clause, material adverse change clause or frustration in any of the company’s agreements
- Decreasing or increasing demand for the company’s products or services
- Earnings guidance for projected profit and loss
- Issues impacting capital raising
Travel restrictions on exploration company workers
It seems there’s a higher risk of COVID-19 infection for international travellers. Governments have recognised this with border closures and mandatory isolation measures. In Australia, this includes closure of borders between the states and territories.
These controls result in diminished workforce availability for exploration companies. Many companies rely on a fly-in fly-out (FIFO) workforce. The ability of FIFO workers to travel to and from work is now heavily restricted. Newcrest Mining was the first Australian mining company to shut down a FIFO travel route.
Axing a FIFO route, or restricting workforce numbers, is material information that your company must report to shareholders. You should qualify such disclosures, stating:
- COVID-19 is rapidly changing; and
- The company’s circumstances are subject to change; and
- The company will disclose material changes as soon as they’re known
Your company should also disclose what precautions it’s taking to protect its workforce from the spread of the virus. For example:
- Reassessing the need for travel; and
- Working from home for 14 days after travelling to affected countries or regions; and
- Temperature-checking all workers before flying in or out
Avoid disclosures which may create a false market
Your company must balance disclosure obligations between the equally important requirements that the information is correct, does not mislead or deceive and does not create a false market.
A false market is a type of market abuse in which a company attempts to interfere with the free operation of the stock market. It does this by providing artificial, false or misleading information to influence investors to behave in a certain way.
ASX Listing Rule 3.1B requires companies to provide information to the ASX if it asks the company to correct or prevent a false market. It can do this even if there’s no other requirement to disclose the information immediately. It may require you to:
- Make an announcement to the market; and/or
- Temporarily suspend trading
If you’re aware of a false market situation, or you’re concerned about one developing, urgently contact us for advice.
Although the effects of COVID-19 persist, listed companies must continue to comply with all legal requirements, including ASX Listing Rules.
It’s more important than ever to accurately disclose material information, with enough detail for shareholders to grasp the company’s situation and to make a decision about how it will affect company shares.
It is a highly stressful time for listed companies, especially resource companies struggling to maintain operations amid reduced or grounded FIFO workforces. Many companies will feel the effects like an offside crash tackle.
We’re here to help you get back into normal operations. Contact us for advice about share market disclosures.