Addressing Public Company Issues in Your Private Company - Arden Phillips
On June 29, 2021, Arden T. Phillips, Vice President and General Counsel of Tahzoo, participated in the Society for Corporate Governance’s webinar entitled, “Addressing Public Company Issues in Your Private Company”. The Society for Corporate Governance (“Society”) is a non-profit membership organization comprised of professionals in governance, ethics and compliance functions at small, private, mid-sized and Fortune 500 companies. The Society’s members are responsible for supporting their board of directors and executive management in matters such as board practices, executive compensation, compliance, SEC and listing exchange regulation, shareholder relations, subsidiary management and other legal matters.
During the webinar, Phillips and the other panelists addressed how and when privately held businesses should implement corporate governance, financial reporting, and risk management processes similar to those required of publicly-traded companies. The panelists advised that choosing whether to implement these processes is highly case specific and dependent upon the priorities of the privately held business.
For example, privately held companies can benefit from having: independent directors; conflicts of interest and code of conduct rules; and committee structure and charters that are typical of publicly traded companies. Further, having financial reporting and disclosure procedures and a formalized enterprise risk management program in place may introduce a level of rigor and process that can create value for the company and its shareholders.
In particular, the panelists stressed that adopting these structures and processes is most important for companies contemplating a future sale or IPO transaction. For these companies, it is advisable to institute at least a “lite” version of the governance practices of publicly traded companies, including standards regarding: board and committee composition; classes of stock; board independence; executive compensation, and financial reporting. The absence of these elements might be seen as “red flags” by potential acquirers or sophisticated shareholders. The panelists closed the webinar by describing recommended methods to implement various governance structures that may enhance the business operations of privately held companies.
The “Addressing Public Company Issues in Your Private Company” webinar was broadcast as part of the Society for Corporate Governance’s 2021 National Conference.
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