Member Article

The consequences of the coronavirus are omnipresent and felt by everyone. Management Board members and Directors of issuers of securities listed on the open or regulated market are faced with the question whether ad hoc publicity obligations are arising for their companies in connection with the corona crisis.

The abstract circumstance of the occurrence of a recession as a result of the spread of the coronavirus does not trigger an ad hoc disclosure obligation. This would be publicly known due to extensive media coverage and therefore not an inside information. An ad hoc disclosure obligation may, however, be considered in the event of specific effects on the company’s business activities.

IMPAIRMENT OF PRODUCTION

The spread of the coronavirus may lead to production impairments. Such impairments may be due to the fact that the company itself is affected, for example, because a large number of employees or certain employees with special expertise required for production are infected with the coronavirus, or because it is not possible to continue production as scheduled or production has to be discontinued due to official orders. However the company may also be indirectly affected e.g. by supply bottlenecks or the discontinuation of production by a key or even the sole.

It is a matter of the individual case how cases are to be assessed in this context in which the issuer’s entire industry is impacted by the effects of the coronavirus, e.g. because the sole supplier of a component required for production is affected by the consequences of the virus or because all competitors are dependent on supplies from a certain region. In such cases, the existence of inside information may be denied under specific circumstances with the argument that the respective information is publicly known with regard to the affected industry. This requires careful examination and consideration in each individual case. In cases of doubt, an ad hoc announcement should be published if the information is likely to have a significant impact on the share price.

NEGATIVE BUSINESS DEVELOPMENT / PROFIT WARNING

If the issuer’s sales or profits are expected to decline, which is likely to have a material impact on the share price, this may result in an obligation to disclose this information on an ad hoc basis. This applies in particular in cases where developments make it necessary to adjust a forecast that had been published by the Issuer.

ABSENCE OF SENIOR EXECUTIVES

Finally, an ad hoc disclosure obligation may be considered if managers will be absent for a significant period of time due to an infection with the coronavirus. In this context, the importance of the individual for the company and the duration and severity of the illness are particularly important.

CONCLUSION

The question of whether an ad hoc disclosure obligation in connection with the corona crisis arises must be carefully considered by managers. This will always be a decision on a case-by-case basis, taking into account the specifics of the company concerned. The key question is often whether the information concerning the company is likely to have a significant impact on the price of the company’s shares. Since the law does not contain any clear criteria as to when this is the case, it is recommended to seek legal advice in cases of doubt.