Thinking About Taking Your Company Public?

Gabriel L. Imperato
Broad and Cassel attorneys at Law
Mr. Gabriel Imperato is the Managing Partner of the Fort Lauderdale office of Broad and Cassel and serves on the
Firm’s Executive Committee. He is a member of the Health Law Practice Group and heads up the Firm’s White Collar
Criminal and Civil Fraud Defense Practice Group. He can be reached at 954-745-5223 or by email at
gimperat@broadandcassel.com.
Thinking About Taking Your Company Public?
With the signing the Sarbanes-Oxley Act of 2002 (the "Act") the corporate landscape of America was
forever changed. The Act is the most sweeping legislation affecting corporate governance, disclosure
requirements and accounting and auditing since the establishment of the securities laws in the 1930s. The
implications for public companies, their directors, officers and stockholders, and the legal and accounting
professions are extremely significant. The Act is the President's and Congress' response to a series of cor-
porate and accounting scandals involving large public companies, such as Enron, WorldCom, and Global
Crossing, which have led to a loss of confidence by the investing public.
The purpose of the Act is to restore the confidence of the investing public in the markets by adding new
disclosure requirements, revising the current governance standards, creating an auditor oversight board,
increasing criminal penalties for securities laws violations and creating new crimes relating to fraud. The
Act, however, has created many issues and areas of uncertainty, which may take years to resolve.
The following points highlight what business owners and corporations should expect under the new
Act.
Auditor Independence and Oversight
The role of the Audit Committee takes on even more importance as the Committee becomes
responsible for the appointment, compensation, and oversight of auditors, who must report direct-
ly to the Audit Committee, not management. The Committee must have the authority and the fund-
ing to retain independent counsel and other advisors.
Members of the Audit Committee must be independent Directors and cannot accept any consult-
ing, advisory, or other compensatory fees from the company other than a director's fee. Committee
members may not be an "affiliated person" of the company, however, the SEC may provide exemp-
tions.
PHONE: (954) 764-7060 FAX: (954) 761-8135
EMAIL: GIMPERAT@BROADANDCASSEL.COM WEBSITE: HTTP://WWW.BROADANDCASSEL.COM
BOCA RATON FORT LAUDERDALE MIAMI ORLANDO TALLAHASSEE TAMPA WEST PALM BEACH

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The Chairman of the Audit Committee
report must fairly present, in all respects, the
must be a "financial expert", which is defined
financial condition and operating results of
as someone who has gained certain financial
the company. Criminal liability attaches to
experience as a public accountant or auditor,
those who certify any statement knowing
or as a principal financial officer, controller,
that the report does not comport with all the
or principal accounting officer of a public
relevant requirements. Sanctions include
company. The Chairman is directly responsi-
fines up to $5 million and imprisonment up
ble for oversight of outside auditors to the
to 20 years.
Audit Committee.
CEOs and CFOs are required to forfeit any
The Audit Committee must pre-approve all
bonuses or other incentive-based or equity-
audits and permitted non-audit services and
based compensation and any profits from the
is responsible for resolving disagreements
sale of securities of the company they might
between management and auditors. The
receive during the 12-month period follow-
Committee also requires regular reports
ing the issuance or filing of a financial report
from auditors.
for which the company was required to pre-
pare an accounting restatement due to mate-
The Audit Committee must establish pro-
rial noncompliance of the company as a
cedures for processing complaints received
result of "misconduct" with any financial
by the company regarding accounting or
reporting requirement under the securities
auditing matters and confidential, anony-
laws.
mous submission of complaints by employ-
ees.
Companies are prohibited from making any
new extensions of credit, renewing existing
The Committee will meet separately each
credit, or materially modifying existing cred-
quarter with management, internal auditors,
it in the form of a personal loan to or for any
and independent auditors and will discuss
director or executive officer. Prohibition
annual and quarterly financials with man-
includes items such as allowing cashless or
agement and auditors. Additionally, the
"same-day" exercises of stock options and
Committee will discuss with management
charging personal expenses to corporate
risk assessment, risk management policies,
credit cards, even if they are promptly repaid
and earnings releases and earnings guidance
to the company. The purchase or sale of
to be provided to analysts and ratings agen-
stock by officers and directors and other
cies.
insiders during pension fund blackout peri-
ods also is prohibited.
Code of Ethics for Senior Officers
The attorneys in Broad and Cassel's White Collar Criminal and
Companies are required to adopt and dis-
Civil Fraud Defense Practice Group have a sophisticated understand-
close a code of business conduct and ethics
ing of how government investigators work at every level as well as our
for directors, officers, and employees, and
clients' operations and workforce. Broad and Cassel's attorneys believe
promptly disclose any waivers of the code
in litigation prevention and have experience in the informal resolution
for directors and executive officers. The code
of investigations, without formal criminal or civil fraud enforcement
of ethics must cover, among other things,
action. We also have unsurpassed experience in dealing with fraud
conflicts of interest, disclosure policies, and
matters in its many forms (criminal, civil and administrative) and
compliance with governmental require-
with all its collateral consequences, such as Federal and state sanctions
ments.
and disciplinary matters and government debarment and exclusions
and contractual relationships. Broad and Cassel's attorneys also offer
Accountability, Liability, and Enforcement
clients the tools they need to proactively avoid criminal and civil expo-
sure and protect their businesses, property, and liberty. For more
New rules require that the CEO and the
information, visit our website at www.broadandcassel.com.
CFO certify each annual or quarterly report
filed with the SEC. The information in the

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