Government Shutdown Risk Factor

Summary

This risk factor is meant for use in a public company's periodic disclosure, such as a Form 10-K, or a registration statement, such as a Form S-1, to disclose risks relating to U.S. federal government shutdowns. This clause contains practical guidance and drafting notes. From time to time, the U.S. Congress will fail to pass, or the President will refuse to sign, legislation necessary to fund government operations before the prior funding legislation lapses. The period between the lapse and when the next appropriations bill is enacted is referred to as a "government shutdown," which refers to the cessation of all "non-essential" government activities. When such a shutdown affects the Securities and Exchange Commission, it can halt the review of filings by staff, effectiveness declarations of registration statements, interpretive guidance, and more. Additionally, a shutdown can be very disruptive to companies subject to approval, permitting, or compliance requirements with U.S. government agencies, companies seeking to register intellectual property rights, and companies that depend on funding and other support programs administered by such agencies. For a 16-day period in 2013 and for a 35-day period spanning 2018 and 2019, the longest ever, government shutdowns brought federal agencies to a standstill. Annual appropriations bills allow this possibility to arise every year and increasing political polarization may lead to a higher frequency of government shutdowns in the future. You should tailor the language in these risk factors to fit the specifics of the company's business, its regulatory environment, the likelihood and likely severity of a government shutdown in the near future, and other relevant circumstances. For information on drafting risk factors, see Risk Factor Drafting for a Registration Statement and Top 10 Practice Tips: Risk Factors. For more on IPOs generally, see Initial Public Offerings Resource Kit.