In March, we provided insights on how companies should address the US Securities and Exchange Commission (SEC) disclosure requirements relating to the war in Ukraine, as well as ensuring that the company’s broader communications comply with US securities laws. On May 3, 2022, the SEC’s Division of Corporation Finance issued a reminder that public companies “may have disclosure obligations” arising from Russia’s invasion of Ukraine.

This essay discusses the SEC’s reminder, what else companies still need to keep in mind about required SEC disclosures and broader communications, and recent disclosure trends. The main takeaways: 1) companies’ SEC disclosures fall into three broad categories based on their exposure to the war, and 2) quite apart from the SEC’s reminder, disclosure and other communications are becoming more challenging because of the increasing uncertainty and the need to ensure that ongoing communications about the war are consistent and comply with securities law.

The SEC’s reminder in May covers familiar ground It states that “companies should provide detailed disclosure, to the extent material or otherwise required,” regarding the following matters:

1. Exposure to Russia, Belarus, or Ukraine through operations, employees, investments, securities, sanctions, or legal or regulatory uncertainty;
2. Direct or indirect reliance on goods or services sourced in Russia or Ukraine or countries supporting Russia;
3. Actual or potential disruptions in the company’s supply chain; or
4. Business relationships, connections to, or assets in the affected countries.

This list is not exhaustive. For example, the SEC guidance also refers to the need for financial statement disclosure of asset impairments, inventory valuations, changes in customer contracts, and collection of receivables. It also refers to heightened cybersecurity risks and volatility of commodity prices.

Focus on forward-looking information In Cutting Ties with Russia (Part 2): A Guide on Disclosure and Communications, published on March 24, we discussed the need to disclose material information relating not only to the company’s operations in the region, but also the broader impact of the war in Ukraine on areas such as supply chains. And we discussed the financial statement “line item” disclosures that may be needed relating to asset impairments, legal proceedings, etc.

Importantly—and not a focus of the SEC’s recent reminder—we addressed the requirement to disclose forward-looking information, including “known trends and uncertainties,” and the challenges that this requirement creates for public companies given the many uncertainties associated with the situation in Ukraine.

Many of those uncertainties continue, and new uncertainties have arisen: for example, the strength of Ukraine’s resistance to the invasion, which could greatly prolong and deepen the conflict; the ongoing imposition of sanctions that continue to damage the Russian economy and make it extremely difficult for companies to do business there; and the evolving roles played by countries that are not participating in international sanctions.

Disclosures to date fall into three categories While it is too early to draw firm conclusions about Ukraine-related disclosures, we see three broad categories, each of which may be appropriate depending on a company’s circumstances:

• Companies directly affected by the invasion, such as those that have shut down their Russian operations, generally appear to be providing clear and robust disclosures of the impact of the Ukraine situation, ranging from quantitative financial statement and management discussion and analysis (MD&A) disclosures of asset write-downs, supply chain challenges, and the impact of rising prices of oil and other commodities, as well as descriptions of the many uncertainties they continue to address.
• Given these uncertainties, including that they make it difficult to determine whether a development is “material,” other companies have opted for more general or qualitative disclosures, outlining some of the actions they may be required to take in the future without providing details—for example, by indicating that asset impairments may be called for in the future without specifying the timing or magnitude of those impairments.
• Still other companies are merely acknowledging that they are monitoring the conflict and will report on its impact, if any, as developments occur. In some cases, these companies note that they do not expect any impacts. However, by providing this disclosure, they are communicating to regulators and investors that they have not overlooked or failed to consider potential ramifications of the war in Ukraine to their operations and performance.

Keep a close eye on ongoing informal communications With the war continuing, companies’ need to communicate outside the context of SEC filings also continues. As noted elsewhere, the era of “one and done” CEO communications about significant events has passed, and companies are adjusting the tone of their communications to reflect the current mood and with an eye toward both near-term and long-term implications for their brand and reputation with multiple stakeholders. In this environment, it’s critical that companies consider informal communications in the context of SEC requirements and prohibitions, and they should strive to maintain consistency in substance and tone across all forms of communication. A failure to achieve this goal can lead to comments from the SEC, potential legal liability, and a loss of credibility generally.

Thus far, it appears that companies are generally up to the task of satisfying the securities law requirements when it comes to communicating about the impact of the war in Ukraine. But it is no easy task—and one that requires continued vigilance, not just by the corporate law department, but also by everyone involved in communicating internally and externally about the war and its effects.