The US Coronavirus Aid, Relief, and Economic Recovery Act (CARES Act) was signed into law on March 27, providing $2.3 trillion in direct payments to citizens, among other stimulus measures for businesses, amid the Coronavirus Disease 2019 pandemic. While the law applies generally across sectors, it also lays out provisions for specific industries including airlines, health care, and financial services.
The US Treasury Department recently announced that certain major airlines—including Alaska Airlines, American Airlines, and United Airlines—intend to accept relief through the CARES Act. Some $25 billion of the $500 billion fund was earmarked specifically for air carriers and certain aviation-related repair stations. Loans to participating companies include restrictions on share buybacks and executive compensation and require that at least 90 percent of a company’s employment as of March 25, be maintained. Furthermore, $25 billion for passenger airlines and $4 billion for air cargo carriers has been set aside as part of a grant program to pay employee salaries. Carriers accepting such grants would not be allowed to reduce services. Certain taxes are also suspended for air carriers, including those for commercial air transport and air transportation of property, through January 1, 2021.
Meanwhile, the health-care sector is seeing support from the CARES Act in multiple ways. For one, $100 billion has been set aside for hospitals and physicians to obtain relief for “non-reimbursable expenses attributable to COVID-19.” Volunteer health-care professionals during the pandemic may tap liability protections in addition to those offered in the Volunteer Protection Act of 1997. There are also grant programs specifically to support telehealth technologies, especially in rural areas.
In the financial services industry, boards must consider a range of provisions, including the allowance for federally insured depository institutions to defer compliance with the Current Expected Credit Losses accounting standard until either the end of the year or the end of the national emergency. Likewise, temporary power extended to the Office of the Comptroller of the Currency eases lending limits for nonbank financial firms and transactions deemed within the public interest.
Implications for Boards: Directors will need towork with their management teams to decide whether they wish to seek relief through the general or industry-specific provisions of the CARES Act. And although the bill is intended to aid individuals, businesses, and the economy, organizations within a given industry should seek to fully understand the particular implications—and potential strings attached—to the provisions aimed at their companies. Finally, US Securities and Exchange Commission chair Jay Clayton stated in interviews with reporters that public companies should be prepared to disclose to shareholders whether or not they are taking relief from the CARES Act and why.
Key Questions Directors Should Ask:
NACD Resources: Board Implications of the CARES Act lays out the key provisions of the law that the board should be aware of, while the blog post “Understanding the Implications of the CARES Act” describes how the law is different from legislation that resulted during or in the aftermath of other crises that came before coronavirus. Additionally, the NACD Washington Review, Q1 2020 provides an overview of the latest legislation and regulation that boards should stay abreast of, with a timeline of the three coronavirus bills passed thus far.