Compliance / Regulatory: Corporate Governance and Securities: Calfee

One of the hallmarks of the post-Enron, post-financial crisis era is an emphasis on good corporate governance. Governance practices matter to key constituencies, including investors, regulators, and courts called upon either to assess corporate conduct or to decide whether to pierce the corporate veil and impose personal liability on shareholders.

Governance is a broad topic and includes the balance struck between the authority of boards and shareholders, the policies established to ensure that matters that should be subject to board oversight are brought to the attention of directors in a timely fashion, and the procedures designed to ensure that the board and management appropriately perform their responsibilities.

Appropriate sensitivity to governance issues is often essential to continued investor support for a company’s board and management, while failure to address governance failings can be used as a wedge issue by activist shareholders.

When a company is under regulatory scrutiny, government agencies often look first to the “tone at the top” − the governance practices and compliance environment set by company management and directors − in assessing the severity of potential sanctions to be sought. When courts are asked to evaluate board decisions, they frequently scrutinize the process by which those decisions were reached and the safeguards established by the board to deal with potential conflicts of interest and other issues that might implicate the directors’ compliance with their fiduciary duties. Finally, when plaintiffs seek to have a corporate entity disregarded and to impose personal liability on shareholders, courts review closely the extent to which the company has complied with recordkeeping and other corporate governance requirements.

Corporate Governance Compliance

We provide a wide range of corporate governance services for privately held and publicly traded companies and their officers and directors. Our services include:

Assisting boards of directors in establishing and evaluating standards for qualification and selection of directors.
Advising boards of directors on various issues concerning their fiduciary and oversight responsibilities.
Advising on matters relating to the establishment and use of special board committees.
Assisting in development of policies and procedures concerning director access to management, employees, auditors and independent advisers.
Assisting in the preparation of appropriate records of board actions and advising and assisting the board and management concerning preparation of board packages, minutes and other recordkeeping issues.
Advising on director compensation and D&O insurance and indemnity issues.
Providing advice and assistance to public companies on governance issues uniquely impacting them, including NYSE and Nasdaq requirements concerning the establishment and responsibilities of various board committees, governance policies of proxy advisory firms and key institutional investors, and emerging public company governance issues.
Assisting in benchmarking governance practices against peer company practices and regulatory requirements and in identifying best practices.

Securities Compliance

Any company that accesses the capital markets, whether through a private placement or a public offering, exposes itself to significant compliance obligations. These include the need to comply with the federal securities laws and state “blue sky” statutes in connection with offerings of debt or equity securities. These statutes uniformly place the burden of compliance squarely on the issuer of the securities, and in addition to civil and even criminal sanctions against issuers and their controlling persons for violations of those laws, they also provide investors with a “put” right, entitling them to rescind their purchase in the event of a violation.

As challenging as compliance with the laws applicable to securities offerings may be, for public companies, that is just the start of the compliance demands that they face.

Public companies must navigate an array of periodic reporting requirements, proxy rules, stock exchange listing requirements and the corporate governance obligations associated with them.

Public company insiders are required to publicly disclose their holdings on an annual basis and are subject to additional reporting and other requirements whenever they trade in their company’s securities. Because the federal securities laws require companies to take reasonable steps to prevent insiders from trading on material non-public information, public companies also must police transactions by their insiders through development and enforcement of appropriate insider trading policies.

Today, companies also face the challenge of a Securities and Exchange Commission that is promising to be even more aggressive regarding enforcement. SEC leaders have made clear their intent to seek significant penalties and other remedial sanctions against both companies and individuals, and also to increasingly pursue enforcement actions for small violations of the law as a means of further deterring more significant misconduct.

Calfee attorneys routinely represent privately held and publicly traded companies when they access the capital markets and assist publicly traded companies and their officers, directors and major shareholders in complying with their obligations under the securities laws and stock exchange rules.

Services

Our services include:

Comprehensive representation of issuers and financial intermediaries in connection with public and private securities offerings.
Education of boards of directors and corporate officers on their obligations under the federal securities laws, and assistance in developing and implementing appropriate policies and procedures to address compliance requirements.
Assistance in developing corporate codes of conduct, audit, compensation, governance and nominating committee charters required by Nasdaq or NYSE rules.
Preparation and review of SEC filings, including annual and periodic reports required under the Securities Exchange Act of 1934, proxy statements, insider transaction and ownership reports.
Review of shareholder communications and assistance in developing and implementing investor communications policies and in Regulation FD compliance.
Representation of public companies, directors and officers in connection with SEC or stock exchange investigations.