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Impact of Corporate Governance Reforms on Private Companies

By Patrick J. Rondeau and David A. Westenberg
May 01, 2003

Public companies are facing dramatic changes in disclosure and corporate governance requirements under the Sarbanes-Oxley Act of 2002 (the Act) and new or proposed rules from the SEC, NASDAQ and the NYSE. While these new rules and regulations do not generally cover private companies, they do affect private companies:

  • A private company will become subject to the Act upon filing a registration statement with the SEC in anticipation of an IPO.
  • Certain aspects of the Act may indirectly become applicable to a private company if it is acquired by a public company.
  • The boards of directors and management of many private companies are embracing various aspects of the Act as “best practices.”

Summarized below are the new requirements that are most likely to be relevant to private companies. Familiarity with these new rules will help private companies avoid pitfalls that could interfere with important future milestones, such as an IPO or acquisition, and help establish a culture of fiscal and corporate responsibility.

Prohibition on Personal Loans

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