CARES Act Limits Share Repurchases: Coronavirus Aid, Relief, and Economic Security Act Contains Limitation on Share Repurchases for Companies Receiving Assistance

Sullivan & Cromwell LLP - March 29, 2020

On Friday, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security Act,” or the “CARES Act,” which authorizes the Secretary of the Treasury to make up to $500 billion in loans, loan guarantees, and other investments in support of certain businesses affected by the coronavirus outbreak, as well as states and municipalities.  As discussed in a separate memo, certain “eligible businesses” that receive “direct loans” in these programs and certain air carrier and related businesses and businesses critical to maintaining national security that receive loans or loan guarantees in these programs (the “Affected Businesses”) may be precluded from repurchasing their listed equity securities while loans or loan guarantees are outstanding, and for a one-year period following the repayment of the loan or expiration of the loan guarantee.  This memo discusses certain issues that companies may want to consider when assessing the impact of such repurchase restrictions on their organizations.