The past few months have brought a number of important developments on the corporate governance and disclosure front. Changes for audit and compensation committees, Iran-related disclosures, and say-on-pay rules for smaller companies are just a few examples of late. I just received this memo from Skadden Partner and Practice Center Contributor Brian Breheny, in which he and his colleagues discuss these developments and others in detail. Here is an excerpt:
SEC Approves Revised Listing Standards Related to Compensation Committees and Advisors. On January 11, 2013, the U.S. Securities and Exchange Commission (SEC) approved the revised listing standards that the New York Stock Exchange and the Nasdaq Stock Market proposed as required by Exchange Act Section 10C(c)(2). Companies with listed securities will be required to satisfy the revised listing standards relating to the independence of compensation committee members by the earlier of their first annual meeting after January 15, 2014, or October 31, 2014. Companies will need to comply with the other new listing requirements by July 1, 2013. Certain companies, such as investment companies and controlled companies, will continue to be exempt from the listing standards related to compensation committees.
New Iran-Related Disclosure Requirements Apply to Reports Required to Be Filed With the SEC After February 6, 2013. The provisions of the Iran Threat Reduction and Syria Human Rights Act of 2012 that require public companies to disclose information pertaining to certain Iran-related activities and transactions apply to periodic reports (Forms 10-K, 10-Q, 20-F and 40 F) required to be filed with the SEC after February 6, 2013. The SEC staff has confirmed its view that the new disclosure requirements apply to periodic reports that may be filed prior to February 6. Companies should review their activities and the activities of their affiliates to determine whether they have engaged in any specified activities or transactions involving Iran and whether disclosures will be required under the new requirements.
Say-on-Pay Rules Now Apply to Smaller Reporting Companies. The temporary exemption from the say-on-pay rules afforded to smaller reporting companies (generally, those with a public float below $75 million) when the SEC adopted the rules in 2011 expired on January 21, 2013. Beginning with their first annual meeting (or special meeting in lieu of an annual meeting) occurring on or after January 21, 2013, smaller reporting companies are required to conduct both a shareholder advisory vote on executive compensation and a shareholder advisory vote on the frequency of say-on-pay votes.
SEC Approves New PCAOB Auditing Standard Relating to Communications With Audit Committees. Last month, the SEC approved Public Company Accounting Oversight Board (PCAOB) Audit Standard No. 16 (AS 16). AS 16 applies to audits of all issuers, including audits of emerging growth companies (EGCs) and supersedes interim standards AU Sec. 80 and AU Sec. 310. The new standard will be effective for audits and quarterly reviews for fiscal years beginning on or after December 15, 2012. Thus, for calendar year companies, the new standard will apply to the auditor’s review of financial statements for the first quarter of 2013 and to the engagement of the auditor for 2013.
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