A looming partial shutdown of the federal government is on track to occur at 12:01 a.m. ET on Sunday, October 1, 2023, if Congress is unable to reach agreement on legislation funding the government. The SEC Division of Corporation Finance (the “Division") announced that in the event of a government shutdown, the SEC's “activities will be extremely limited" and specifically, that it would not be able to accelerate the effectiveness of registration statements. The Division advised that, to the extent possible, registrants with pending registration or offering statements that have satisfied the requirements to request acceleration of the effective date should consider requesting effectiveness or qualification while the Division continues its normal operations. The Division provided a Q&A with its announcement addressing potential impacts before, during and after a potential shutdown. On September 29, the Division posted an additional announcement with contact information for addressing fee calculations and emergency filing relief during a shutdown.
Regardless of the SEC's operating status, the EDGAR filing system will continue to accept reports, registration statements, offering statements, preliminary and definitive proxy statements, insider ownership and transaction reports, and other filings. Accordingly, public companies must continue to file periodic and current reports when due on Forms 10-K, 10-Q and 8-K (for the purposes of rules involving day counting, the days for which the government is shut down—other than Saturday, Sunday or a federal holiday—will continue to count as “business days").
Additionally, the Q&A notes that in the event of a shutdown, the Division will not be able to review or respond to shareholder proposal no-action letters but will return to reviewing no-action requests when the SEC's operations resume. Registrants should continue to timely submit those letters under Rule 14a-8(j). Likewise, the Q&A notes that the Division will not be able to review preliminary proxy statements, which must continue to be filed at least 10 calendar days prior to the date definitive materials are first sent to shareholders. The Division may review previously filed proxy statements after the SEC's operations resume.
Public companies that have an effective shelf registration statement on file can undertake a shelf takedown during a shutdown. And automatically effective registration statements (e.g., Form S-8 and Form S-3ASR) can be filed and will go effective during a shutdown.
A prolonged shutdown could create difficulties for the IPO market and for public companies that do not qualify as “Well Known Seasoned Issuers" (WKSIs) and do not have an effective shelf registration statement. As noted in the Q&A, while the Division is open and operating, the Division will consider requests for acceleration or qualification of a registration or offering statement in the absence of a “no objections" statement from FINRA regarding underwriting compensation arrangements; however, underwriters will be required to confirm that they will not execute the underwriting agreement or confirm sales of the registered securities until they have received the “no objections" statement. Additionally, companies are requested to inform FINRA of their plans to request acceleration or qualification. The September 29 announcement has instructions on who to contact to request acceleration of the effective date of a pending registration statement or qualification of a pending offering statement on September 29, prior to the shutdown.
If not accelerated, registration statements on Forms S-1 and S-3 become effective 20 days after their most recent public filing, unless subject to a “delaying amendment." The Q&A notes that new registration statements may be filed without delaying amendments in anticipation of the closure; however, should the SEC resume operations (or a shutdown does not occur) prior to effectiveness, the Division may ask that the filing be amended to include a delaying amendment. Registrants should carefully consider options in this regard, especially if the registration statement is the subject of a pending review. Similarly, after the beginning of a shutdown, companies may file an amendment to registration statements to remove delaying amendments in order to allow the registration statement to become effective after the 20-day period. If, during the course of the shutdown, filers wish to delay the effective date of a registration statement past 20 days, they may file another pre-effective amendment that does not include a delaying amendment and the registration statement would not go effective until 20 days after such pre-effective amendment. Should SEC operations restart prior to effectiveness, the Division may ask that the registration statement be amended to include the delaying amendment. If a delaying amendment is removed, the Division notes that the registration statement must be amended to include all information required by the form, since Rule 430A is only available for registration statements that are declared effective.
Although not addressed in the Q&A, unless accelerated, Form 10s become effective 60 days after initial public filing and are not subject to delay. As a result, Form 10s must be withdrawn prior to the end of the 60-day period if companies wish to avoid going effective.
The Division has stated that it intends to provide information regarding any imminent change in its operating status with as much advance notice as possible by means of status updates posted to the SEC website.
We would like to thank associates Chris Ayers, Victor Twu, and David Korvin for their assistance in preparing this alert.