Over the last couple of years, the U.S. Securities and Exchange Commission (SEC) has focused on the disclosures that China-based companies made in their public filings about operating in China. This focus has led to the promulgation of a significant amount of guidance from the SEC, including the issuance by the SEC of two sample "Dear Issuer" letters (click here to see the first sample letter, and click here to see the second sample letter). As a result, companies based in China have developed an extensive set of disclosures in their public filings relating to risks associated with being based and operating in China. 

Thus far, there has been no equivalent increase in disclosure for companies that are not based in China but that nonetheless have significant operations in and/or exposure to China. That may soon change, however.  

Former SEC Chairman Jay Clayton recently proposed that companies with significant ties to China should provide more extensive disclosures about the impact that a significant break in the U.S.-China relationship would have on their operations. While nominally initially targeted at large companies, the proposal could easily apply to any company that would be materially impacted by a significant impairment in the U.S.-China relationship. Based on the disclosures required to be made by China based companies, such new disclosures, if implemented, could be quite significant and cause companies to incur significant costs and transaction delays.