Impact to U.S. Public Companies/Boards
- Promptly Integrate Regulatory, Financial and Marketing Disclosures. Given upcoming quarterly earnings calls, second quarter 2016 Form 10-Q reporting deadlines and regularly released business communications, by late July/early August 2016, management and boards, including relevant board committees, will need to be prepared to address and integrate messaging surrounding Brexit’s impact. Convening the audit and disclosure committees with management to identify key business risks and to review and update the exposure to Brexit on foreign currency volatility, credit ratings, impacts on hedging strategies, treasury management, liquidity, collectability of receivables, potential asset impairments and intercompany transactions should be a priority. Management and/or investor relations will also need to anticipate and prepare for inquiries from analysts, investors and press and update marketing materials and websites, if necessary.
- Optimize Opportunities for Strategic Planning. Companies should evaluate their current and anticipated business strategies in a post-Brexit world during this transition period to prioritize their responses and develop strategic plans to identify new opportunities and alternatives strategies as well as manage overall business risks, including, but not limited to, issues with employees, customers, suppliers and other affected counterparties, and regulatory and tax burdens. Boards should establish the overall strategic plan in conjunction with discussions with management and determine with management whether there are sufficient resources to execute upon strategic plans and manage risks related to Brexit. Boards should also determine the sufficiency of their current committee structure and meeting schedules depending upon the expected impact of Brexit and make necessary modifications.
- Undertake Comprehensive Review of Legal Agreements. Companies should undertake a comprehensive review of their legal agreements to identify, in light of Brexit, whether their boards will need to provide authorization to amend, renegotiate or terminate certain existing or pending contracts. Terms and provisions relating to currency exchange rates, credit ratings, financial strength of counterparties in affected jurisdictions, governing law and dispute resolution (particularly in restructurings) and contracts denominated in foreign currencies and issues related to future performance should be evaluated for Brexit-associated risks. Material Adverse Effect (MAE) clauses in pending agreements should be reviewed and modified to address any specific concerns related to Brexit.
- Engagement with Various Constituencies. Post-Brexit, companies and their boards should discuss priorities surrounding their active engagement with employees, for recruiting and retention initiatives, and shareholders, amidst prolonged stock market volatility and potential for shareholder activism. Boards and management should assess opportunities to provide industry leadership and promote corporate social responsibility goals.
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