Public Company Corporate Governance

Capital Markets Law Group assists companies with board composition, committees, policies, shareholder approvals, fiduciary processes, and governance disclosure.

What Should the Board Review?

The board may oversee:

• SEC reporting
• Financings
• Acquisitions
• Related-party transactions
• Executive compensation
• Equity awards
• Auditor engagement
• Risk management
• Internal controls
• Cybersecurity
• Insider trading
• Whistleblower matters
• Material contracts
• Corporate strategy
• Regulatory compliance

What Committees May Be Required?

Exchange-listed companies generally maintain independent:

• Audit committees
• Compensation committees
• Nominating or governance processes

OTC companies may not be subject to all exchange requirements but may still benefit from appropriately structured oversight.

What Policies Should Be Considered?

Potential policies include:

• Code of conduct
• Insider-trading policy
• Disclosure controls
• Related-party transaction policy
• Whistleblower policy
• Compensation-recovery policy
• Regulation FD policy
• Document-retention policy
• Cybersecurity procedures
• Committee charters
• Equity-award procedures
• Hedging and pledging policy

When Should Counsel Become Involved?

When the governance question has consequences rather than merely a document to sign. Approvals, independence determinations, and committee actions that are taken incorrectly are expensive to unwind, and some cannot be undone at all. Early counsel review covers:

• Mapping the governance requirements that apply to the company's exchange and status
• Determining director independence before committee seats are filled
• Setting the approval path for issuances and major transactions
• Adopting policies before the events they govern occur
• Planning the disclosure that reports the governance to shareholders

What Documents Are Required?

Common documents include:

• Charter and bylaws
• Committee charters
• Governance policies and guidelines
• Board and committee resolutions and minutes
• Independence determinations and questionnaires
• Director and officer questionnaires for proxy disclosure
• Approval documentation for issuances and transactions
• Proxy statement governance disclosure

What Commonly Causes Problems?

Recurring issues in corporate governance matters include:

• Committees acting without properly seated independent members
• Approvals taken in the wrong sequence for exchange rules
• Policies adopted but never followed in practice
• Related-party transactions approved without the required process
• Minutes that do not support the actions the company reports
• Governance disclosure in the proxy that no longer matches practice
• Charter provisions that conflict with exchange requirements

What Alternatives Are Available?

Choices exist at each layer: the state of incorporation and its corporate law, the choice of exchange or OTC venue, committee structures, and the policies the company adopts. Each choice changes the requirements that follow, so the governance design should be settled with the company's financing and listing plans in view rather than copied from a template.

How Does Capital Markets Law Group Help?

Our services may include:

1. Reviewing governance structure
2. Preparing board and committee charters
3. Drafting governance policies
4. Advising on director independence
5. Preparing meeting materials and minutes
6. Reviewing related-party transactions
7. Advising on shareholder approvals
8. Preparing governance disclosure
9. Supporting exchange compliance
10. Training directors and officers

Frequently Asked Questions

Does an OTC Company Need Independent Directors?

That depends on its status and applicable requirements. Independence may still support oversight, financing, and future uplisting plans.

Can Management Approve Its Own Compensation?

Compensation decisions should follow corporate law, governing documents, fiduciary requirements, and exchange rules.

How Often Should Policies Be Updated?

Policies should be reviewed periodically and when applicable laws, exchange rules, management, operations, or risks change.

Are Board Minutes Public?

Usually not, but minutes may later be examined in due diligence, audits, litigation, or regulatory inquiries.

Which Committee Reviews Related-Party Transactions?

Commonly the audit committee, where the company has one, supported by the policy the board adopts on the subject. The policy should identify who reviews, what the reviewer must consider, and when the transaction requires board approval, and the process should be documented before the transaction happens.

Does Every Company Need a Code of Conduct?

Exchange-listed companies generally do, as part of the exchange's qualitative requirements. OTC companies benefit from one as well, and an uplisting plan will require it, so adopting the code early avoids duplicating the work later.

What Is a Compensation-Recovery Policy?

A policy that allows the company to recover incentive compensation from executives in defined circumstances, typically after a restatement. Exchanges require listed companies to maintain one that meets the applicable rule, and the policy's terms should be drafted to fit the company's plans.

How Does Governance Affect an Uplisting?

Significantly. Exchange applications review board independence, committee composition, charters, and policies, and deficiencies discovered during the application delay it. A governance review before the application is prepared is cheaper than a rework after Nasdaq or NYSE American comments arrive.