Canada: Directors fiduciary duty in a pandemic: You need a protocol!
COVID-19 has had and will continue to have impacts on virtually every corporation in Canada and globally.
On April 7, 2017, the SEC’s Division of Corporation Finance issued a statement stating that it would not recommend enforcement action if companies subject to the Conflict Minerals rule only perform a reasonable country-of-origin inquiry and file only a Form SD without the detailed supply chain due diligence disclosure, Conflict Minerals Report or independent private sector audit required by Item 1.01(c) of Form SD. The full text of the Division of Corporation Finance’s statement is available here.
The statement follows the entry on April 3, 2017 of the final judgment of the D.C. District Court ruling that the Conflict Minerals statute and rule (Section 13(p) of the Securities Exchange Act and Rule 13p-1 issued thereunder) violated the First Amendment to the extent they required companies to report to the SEC and disclose on their websites that any of their products have “not been found to be ‘DRC conflict free’” and remanding the matter to the SEC. The ruling left open the question of whether the description is required by the statute or is a product of the SEC rule-making.
In light of the ruling and the comments received in response to Acting SEC Chair Michael Piwowar’s request for comments on the Conflict Minerals rule in January 2017, the Division of Corporation Finance is considering the issues related to the Conflict Minerals rule. Given the uncertainty regarding how the SEC will resolve these issues, the Division of Corporation Finance issued what is effectively a blanket “no-action letter” stating that “it will not recommend enforcement action to the Commission if companies, including those that are subject to paragraph (c) of Item 1.01 of Form SD, only file disclosure under the provisions of paragraphs (a) and (b) of Item 1.01 of Form SD. This statement is subject to any further action that may be taken by the Commission, expresses the Division’s position on enforcement action only, and does not express any legal conclusion on the rule.” This new relief goes beyond the Division of Corporation Finance’s April 2014 relief, which only relieved companies from the requirement to characterize their products as “DRC conflict undeterminable” or “not found to be ‘DRC conflict free,’” but otherwise required them to comply with the requirements to provide a description of the supply chain due diligence conducted and to file a Conflict Minerals Report with their Form SD.
The new relief will have immediate impact on companies subject to the Conflict Minerals rule, which are in the process of preparing their 2016 Forms SD due this year on May 31, 2017.
As business resumes in the workplace and circumstances change, American companies must be ready.