Sarbanes-Oxley Act of 2002 has significantly ?elevated the bar? for many areas of corporate governance and financial compliance for public companies. Many private companies can expect that several of these requirements will also, directly or indirectly, be extended to them. By taking action now to comply voluntarily with many of these requirements, larger private companies (or those companies with aspirations of achieving significant growth, going public or being acquired) can reap rewards associated with third party approvals and improved internal controls and governance. In addition, investors and acquirors may be willing to pay a premium to invest in or buy companies with sound corporate governance practices.
The administrative cost?in time and dollars?associated with undertaking such actions will in most cases be outweighed by these benefits.
Financing Transactions
Private companies that are seeking financing should expect investors to request additional information and possibly request specific corporate governance covenants. Many venture capitalists serve on boards of directors for other companies, some of which may be public companies and some of which may be preparing for an IPO. Investors want to know that the portfolio company is well-suited for a liquidity event, such as an IPO, and that if the company goes public, it will be able to succeed as a public company.
Mergers and Acquisitions
Another possible liquidity strategy for a private company may be merging with, or being acquired by, a public company. When a public company acquires a private company, the private company?s financial results are usually consolidated with the acquiror?s financial results. Also, the public company usually takes on the liabilities of the private company. For these reasons, public company acquirors are increasingly taking steps in their due diligence to determine whether the private company has implemented good corporate governance practices and sound financial reporting processes. The primary reasons why public company acquirors may spend more time inquiring about the private company?s practices in these areas include:
Public companies that acquire private targets will take comfort knowing that the business they are acquiring is less likely to face shareholder litigation or discover hidden fraud or other abuses.
The acquiror will appreciate relying on the target?s sound internal inancial processes, especially as those results get consolidated with the acquiror?s results.
Other Benefits
Even if the company is not considering a liquidity event in the near future, there are many other parties that will expect to see an increased level of compliance. For example:
Banks and other lenders may increase their inquiries about the company?s financial reporting processes.
Prospective board member candidates may demand enhanced governance practices before accepting a nomination.
Prospective senior management team members will also ask more questions about a company?s practices before accepting a position of leadership and responsibility.
Customers, joint venture partners and other business partners that are public companies will expect their business partners to follow the same practices.
The administrative cost?in time and dollars?associated with undertaking such actions will in most cases be outweighed by these benefits.
Financing Transactions
Private companies that are seeking financing should expect investors to request additional information and possibly request specific corporate governance covenants. Many venture capitalists serve on boards of directors for other companies, some of which may be public companies and some of which may be preparing for an IPO. Investors want to know that the portfolio company is well-suited for a liquidity event, such as an IPO, and that if the company goes public, it will be able to succeed as a public company.
Mergers and Acquisitions
Another possible liquidity strategy for a private company may be merging with, or being acquired by, a public company. When a public company acquires a private company, the private company?s financial results are usually consolidated with the acquiror?s financial results. Also, the public company usually takes on the liabilities of the private company. For these reasons, public company acquirors are increasingly taking steps in their due diligence to determine whether the private company has implemented good corporate governance practices and sound financial reporting processes. The primary reasons why public company acquirors may spend more time inquiring about the private company?s practices in these areas include:
Public companies that acquire private targets will take comfort knowing that the business they are acquiring is less likely to face shareholder litigation or discover hidden fraud or other abuses.
The acquiror will appreciate relying on the target?s sound internal inancial processes, especially as those results get consolidated with the acquiror?s results.
Other Benefits
Even if the company is not considering a liquidity event in the near future, there are many other parties that will expect to see an increased level of compliance. For example:
Banks and other lenders may increase their inquiries about the company?s financial reporting processes.
Prospective board member candidates may demand enhanced governance practices before accepting a nomination.
Prospective senior management team members will also ask more questions about a company?s practices before accepting a position of leadership and responsibility.
Customers, joint venture partners and other business partners that are public companies will expect their business partners to follow the same practices.
משרד שטיינברג-רבינוביץ נוסד בשנת 2001, על ידי השותפים, עורכי הדין נתן שטיינברג ואריה רבינוביץ, ומתמחה בתחומי המשפט המסחרי, תוך התמקדות מיוחדת בליווי תאגידים ויעוץ לבעלי מניות ומנהלים.
למשרד התמחות מיוחדת בתחום "הממשל התאגידי", במסגרתו מייעץ המשרד, בין היתר, בנושאי ניהול סיכונים משפטיים ותאימות לדרישות רגולציות שונות, כך למשל, תקנות Sarbanes Oxley וממשל תאגידי.
למשרד התמחות מיוחדת בתחום "הממשל התאגידי", במסגרתו מייעץ המשרד, בין היתר, בנושאי ניהול סיכונים משפטיים ותאימות לדרישות רגולציות שונות, כך למשל, תקנות Sarbanes Oxley וממשל תאגידי.
