ipo readiness

IPO Readiness

September 5, 2012

Attorney Advertising

WilmerHale 2

Contents IPO Process (slides 3-6)

Impact of JOBS Act (slides 7-18)

Quiet Period (slides 19-24)

Management (slide 25)

Board of Directors (slides 26-40)

Corporate Governance (slides 41-49)

Corporate and Capital Structure (slides 50-54)

Equity Incentives (slides 55-56)

Financial and Audit Matters (slides 57-58)

Getting Started (slides 59-66)

SEC Review (slides 67-74)

Life as a Public Company (slide 75)

For More Information (slide 76) © 2014 Wilmer Cutler Pickering Hale and Dorr LLP

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IPO Process

Begin corporate housekeeping and IPO preparations

Pick underwriters and assemble team

Enter “quiet period”

Org meeting

Underwriter due diligence (ongoing)

Prepare and file Form S-1

Clear SEC comments

Road show

Price IPO and sign Underwriting Agreement

Closing

© 2014 Wilmer Cutler Pickering Hale and Dorr LLP

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IPO Process

Relationships Among IPO Participants


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IPO Process

Overall Timeline Preparation should begin 3-6 months before org meeting

Generally 4-6 weeks from org meeting to filing (assumes strong draft of “Business” section circulated prior to org meeting)

Filing to closing requires 3-4 months

But all subject to company readiness, SEC review process, market conditions and numerous other factors


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IPO Process

Illustrative Timeline


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Impact of JOBS Act

JOBS Act enacted on April 5, 2012

Intended to spur job creation and economic growth by improving access to the capital markets for startup and emerging growth companies

Many provisions potentially of interest to pre-IPO companies and recent IPO companies

Provisions applicable to IPOs are immediately in effect

All provisions, except crowdfunding, available to foreign issuers


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Impact of JOBS Act

“Emerging Growth Company” An "emerging growth company" (EGC) is any issuer that had

total gross revenues of less than $1 billion during its most recently completed fiscal year, other than an issuer that completed its IPO on or before December 8, 2011

Note that EGC status is available to companies that went public after December 8, 2011

EGCs have up to five years following an IPO to come into full compliance with certain disclosure regulations and accounting and auditing standards that are otherwise applicable to all U.S. public companies


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Impact of JOBS Act

Termination of EGC Status A company that is an EGC on the first day of its fiscal year will

no longer qualify as an EGC upon the earliest of – the last day of the fiscal year during which it had total annual

gross revenues of $1 billion (indexed for inflation),

– the last day of its fiscal year following the fifth anniversary of the first sale of its common equity securities in a public offering,

– the date on which it has, during the previous three-year period, issued more than $1 billion in non-convertible debt, or

– the date on which it becomes a "large accelerated filer" (a company that has been public for at least twelve months, has filed one Form 10-K and has a public float of at least $700 million)


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Impact of JOBS Act

Reduced Financial Statement and MD&A Requirements EGCs are required to provide audited financial statements for

only two years (instead of three)

Maximum time period for separate financial statements of acquired business is also two years

EGCs need not present selected financial data for any period prior to the earliest audited period

An EGC’s MD&A must cover only the fiscal periods presented in the required financial statements


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Impact of JOBS Act

Exemptions from Audit and Accounting Requirements EGCs are not required to obtain audits of their internal control

over financial reporting (ICFR)

EGCs are not subject to accounting standards that are adopted or revised on or after April 5, 2012 until these standards are applied to “non-issuers” (companies that have not filed a Form S-1) – an EGC must choose whether it will avail itself of this exemption

at the time the EGC is first required to file a registration statement, periodic report or other report with the SEC

– an EGC is not permitted to choose to comply with some but not all of the non-issuer accounting standards


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Impact of JOBS Act

Exemptions from Audit and Accounting Requirements (con’t) EGCs are exempt from any future audit firm rotation and

"auditor discussion and analysis" requirements adopted by the Public Company Accounting Oversight Board (PCAOB)

EGCs are exempt from other new PCAOB auditing standards unless the SEC determines that application of the new rules to audits of EGCs is necessary or appropriate in the public interest, after considering the protection of investors and whether the action will promote efficiency, competition and capital formation


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Impact of JOBS Act

Relaxed Disclosure Requirements EGCs are not required to provide a CD&A

EGCs are permitted to provide the “scaled” executive compensation disclosures previously available only to “smaller reporting companies” (generally, companies with a public float of less than $75 million, regardless of revenue or assets)

EGCs are exempt from several executive compensation requirements imposed by the Dodd-Frank Act – say-on-pay, say-when-on-pay and say-on-parachute votes

– pay ratio and pay-for-performance compensation disclosures


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Impact of JOBS Act

Acceptance of EGC Standards Except for the extension of time to comply with new and

revised accounting standards (which must be adopted on an “all or nothing” basis), an EGC may pick and choose among the exemptions and relaxed standards available to EGCs

The extent to which EGC standards will be adopted by EGCs is uncertain


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Impact of JOBS Act

Impact on Marketability? The extent to which EGC standards will be accepted by the

market is uncertain

An EGC should discuss with its IPO underwriters the impact of adopting EGC standards on marketability of the offering

Acceptance of EGC standards by underwriters and investors may be affected by the fact that the overwhelming majority of all IPO companies (approximately 90% based on historical data) will qualify as EGCs


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Impact of JOBS Act

Conduct of Offerings EGCs and their representatives may engage in oral and

written communications with “qualified institutional buyers” and “institutional accredited investors” to determine their interest in investing (“test the waters”) both before and after the filing of a registration statement

Research analysts have greater ability to communicate with investors and with the EGC's management

Underwriters participating in an EGC’s IPO have more latitude to publish research reports regarding the EGC

Existing FINRA rules remain relevant, and market practices still developing


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Impact of JOBS Act

Confidential Review of Form S-1 EGC can submit “draft” Form S-1 for confidential SEC review,

enabling EGC to maintain its IPO plans and disclosures in secrecy until much later in the process

Form S-1 must be substantially complete, including all required financial statements and audit reports, but need not be signed by the company or include consents from auditors or other experts

SEC review process unchanged

Confidential filing will delay any perceived benefits of filing, such as attraction of potential acquirers

Form S-1 and amendments must be publicly filed on EDGAR not later than 21 days before road show


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Impact of JOBS Act

Other Changes The Act directs the SEC to permit general solicitation and

advertising in private placements by all companies (not just EGCs) so long as all purchasers in Rule 506 private placements are “accredited investors” and all purchasers in Rule 144A offerings are “qualified institutional buyers”

The Act increases the threshold for mandatory SEC reporting to 2,000 stockholders or 500 non-accredited investors, in either case excluding securities issued pursuant to exempt employee compensation plans

“Crowdfunding” permitted by private companies but subject to registration, reporting and other requirements (crowdfunding exemption not yet in effect)


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Quiet Period

During the quiet period, company must avoid all public communications that have the intent or effect of promoting the company to prospective investors, or otherwise arousing public interest in the company or its securities

Statements in press releases, media interviews, website postings or social media touting the company or its prospects may violate the quiet period rules

Generally understood to begin at the time of the org meeting or the selection of underwriters

Ends 25 days after the offering date


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Quiet Period

Sanctions for Violations Second SEC is judge and jury

– “cooling-off” period

– corrective disclosure

– rescission risk disclosure

– civil penalties

Notable examples – Google, Groupon, salesforce.com, Webvan


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Quiet Period

Safe Harbors Rule 163A – No communication made more than 30 days

prior to initial Form S-1 filing is an offer (provided it does not mention the offering and the company takes reasonable steps to control re-distribution)

Rule 169 – Can continue regular release of factual business information intended for use by persons, such as customers or suppliers, other than in their capacity as investors or potential investors – does not permit forward-looking information


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Quiet Period

Safe Harbors (con’t) “Test-the-Waters” – EGCs may engage in oral and written

communications with “qualified institutional buyers” (as defined in Rule 144A) or institutions that are “accredited investors” (as defined in Regulation D) to determine whether such investors have an interest in a contemplated securities offering, either before or after filing a registration statement

Rule 135 – Permits a limited public announcement that a company is planning a public offering of securities, prior to filing the Form S-1


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Quiet Period

Recommendations In general, do not increase historic level of public

communications

Develop calendar of anticipated pre-IPO public communications

Structure all public communications to fall within one of the safe harbors

Review all press releases and other public communications with counsel in advance

Prior to filing the Form S-1, restrict knowledge of the IPO within the company on a “need to know” basis


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Quiet Period

Recommendations (con’t) Avoid public disclosure of the company’s IPO plans, except to

customers, suppliers and other third parties with whom there is a legitimate business need to share the plans

Designate company representatives who are authorized to communicate on behalf of the company with the media, the financial community and the public at large, and instruct all employees to refer inquiries to the designated persons

Avoid giving interviews or otherwise being the subject of stories, articles or other media coverage

Social media present special challenges


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Management

Management team should be in place early in IPO process

IPO and public company experience helpful

Adopt indemnity agreements

Consider employment and/or CIC agreements

Confirm officers and titles

Identify executive officers and Section 16 officers

Consider need for personal tax or estate planning


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Board of Directors

Majority must be independent within one year (most companies target immediate compliance)

Generally want at least five independent directors for reasonable sharing of board committee duties

Adopt indemnity agreements

Procure adequate D&O insurance


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Board of Directors

Independence General Nasdaq/NYSE definition of independence:

– director can’t be “independent” if he or she does not satisfy six bright-line tests

– assuming no disqualification under the “bright-line” tests, in order to be “independent” Board must affirmatively determine that director does not have a relationship which, in its opinion, would interfere with exercise of independent judgment in carrying out responsibilities of a director

Stock ownership, regardless of level, is generally not viewed as an impediment to independence (except for audit committee purposes, if over 20% post-IPO)


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Board of Directors

Independence (con’t) Bright-line tests:

– director may not be a current employee or have been an employee during past three years

– director may not have a family member who is, or has been during past three years, an executive officer of the company

– director, or a family member, may not have accepted payments from the company in excess of $120,000 in any 12-month period within past three years (not including director fees)

– director, or a family member, may not be an executive officer of an entity of which any of the company’s executive officers was a compensation committee member during past three years


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Board of Directors

Independence (con’t) Bright-line tests (con’t):

– director, or a family member, may not have certain specified relationships with another entity that received payments from or made payments to the company in the past three years in excess of (1) in the case of Nasdaq, the greater of $200,000 and 5% of the recipient’s gross revenues for that year, or (2) in the case of NYSE, the greater of $1 million and 2% of the other company’s gross revenues for that year

– director, or a family member, may not be a current partner of the company’s outside auditor or have worked on the company’s audit during past three years


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Board of Directors

Board Committees Three key committees:

Audit Committee three “super independent” directors (phase-in permitted) need one “Audit Committee Financial Expert” many responsibilities prescribed by SEC and Nasdaq/NYSE

Compensation Committee need for Nasdaq/NYSE, tax and securities law reasons importance has increased with focus on executive compensation will soon need to be “super independent”

Nominating and Corporate Governance Committee need for Nasdaq/NYSE, SEC disclosure and IR reasons serves as governance “cop”


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Board of Directors

Audit Committee At least three members, all of whom are “super independent”

– must satisfy general Nasdaq/NYSE independence definition

– cannot, directly or indirectly, receive any consulting, advisory or other compensatory fee from company (other than for service as a director or committee member)

– must not be an “affiliated person” of company

– must not have participated in preparation of company’s financial statements during past three years

Phase-in permitted: one independent at effectiveness; majority independent within 90 days; all independent within one year (but many companies target immediate compliance)


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Board of Directors

Audit Committee (con’t) Nasdaq/NYSE rules require all members be able to read and

understand fundamental financial statements

Nasdaq requires at least one member have “financial sophistication” from past employment or experience in finance or accounting, or professional accounting certification

NYSE requires at least one member have accounting or related financial management expertise

Full board of directors must determine and disclose whether at least one audit committee member qualifies as an “audit committee financial expert” (as defined by the SEC)


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Board of Directors

Audit Committee Financial Expert SEC definition: A person with the following five attributes:

– understanding of GAAP and financial statements

– ability to assess general application of GAAP in connection with accounting for estimates, accruals and reserves

– experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to breadth and complexity of issues that can reasonably be expected to be raised by the company's financial statements, or experience actively supervising one or more persons engaged in such activities

– understanding of internal controls and procedures for financial reporting

– understanding of audit committee functions © 2014 Wilmer Cutler Pickering Hale and Dorr LLP

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Board of Directors

Audit Committee Duties Must have a charter

Rule 10A-3 (SEC requirements): – must be directly responsible for appointing, setting compensation

of, and overseeing work of auditor

– must adopt procedures for receiving and handling accounting and auditing complaints

– must have power to engage advisors

– must have funding authority

Review and approve “related-party transactions” (required by Nasdaq and recommended by NYSE)


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Board of Directors

Compensation Committee Nasdaq requires that executive compensation be determined,

or recommended to board, by: – a majority of independent directors; or

– a Compensation Committee comprised solely of independent directors

NYSE requires Compensation Committee consisting solely of independent directors

Other reasons for Compensation Committee – tax and securities law advantages

– investor expectations

Should have a charter


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Board of Directors

Compensation Committee “While there may be instances in which a board may act with deference to corporate officers’ judgments, executive compensation is not one of those instances. The board must exercise its own business judgment in approving an executive compensation transaction.”

— Vice Chancellor Noble,

Delaware Court of Chancery

August 24, 2004


Presenter

Presentation Notes

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Board of Directors

Nominating/Governance Committee Nasdaq requires that director nominations be made, or

recommended to board, by: – a majority of independent directors; or

– a Nominations Committee comprised solely of independent directors

NYSE requires Nominating/Governance Committee consisting solely of independent directors

Other reasons for Nominating/Governance Committee – SEC disclosure requirements

– institutional investor standards

Should have a charter


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Board of Directors

Controlled Companies Definition: a company of which more than 50% of the voting

power is held by an individual, a group or another company

Exempt from many (but not all) corporate governance requirements: – majority of directors need not be independent

– need not have separate compensation committee

– need not have separate corporate governance and nominating committee

Audit committee requirements still apply


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Board of Directors

Leadership Structure SEC rules require public companies to discuss their board

leadership structure in annual proxy statement: – whether and why the board has chosen to combine or separate

the CEO and board chair positions

– why the chosen structure is appropriate given the company’s specific characteristics or circumstances

Above disclosure not required in Form S-1, but appointment of “lead director” viewed as best practice when CEO is also board chair

Majority of IPO companies now separate the roles of CEO and board chair


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Board of Directors

Compensation Mix of stock and cash is typical

Additional fees often paid for chair and committee roles

Increased public company demands have increased director compensation

Directors affiliated with venture capitalists or other institutional investors often forego board compensation, as a matter of policy or appearance rather than any legal requirement


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Corporate Governance

Code of Business Conduct and Ethics

Corporate Governance Guidelines

Insider Trading Policy

Related Person Transaction Policy

Disclosure Policy

Disclosure Controls and Procedures

Other Policies


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Code of Business Conduct and Ethics SEC – disclosure requirement regarding code for senior

executives

Nasdaq/NYSE – require for all employees and directors

Code must be publicly available

Amendments and waivers are publicly reported

Code must include enforcement mechanisms


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Code of Business Conduct and Ethics Conflicts of interest Full, fair, timely and

understandable disclosure

Compliance with laws Corporate

opportunities

Confidentiality Fair dealing Protection and proper

use of company assets Encouraging reporting

of illegal or unethical behavior


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Corporate Governance Guidelines Director qualification

standards Director

responsibilities Director access to

management Director access to

independent advisors Director compensation

Stockholder access to independent directors

Director orientation and continuing education

Management succession

Performance reviews Annual meeting

attendance


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Insider Trading Policy Prohibit trading while aware of material nonpublic information

Prohibit tipping

Blackout periods (quarterly and special)

Pre-notification / clearance of transactions

10b5-1 plans

Limits on short selling, derivative transactions and margining company stock


WilmerHale 46


Related Person Transaction Policy Policy advisable because SEC rules require disclosure of

related person transactions and of company’s policies and procedures for reviewing, approving or ratifying these transactions

Typically requires transactions between company and “related persons” to be reported to the General Counsel and reviewed and approved by the Audit Committee in advance

Exceptions based on SEC rules often help make policy workable


WilmerHale 47


Disclosure Policy What does company plan to disclose?

Handling of material nonpublic information – authorized spokespersons

– no comment policy

– limiting internal distribution

Disclosure Policy often supplemented by disclosure guidelines that provide more detailed guidance for senior executives, legal personnel and investor relations personnel


WilmerHale 48


Disclosure Controls and Procedures Designed to ensure that information required to be disclosed

in SEC reports is recorded, processed, summarized and reported within required time periods

Designed to ensure that information required to be disclosed is accumulated and communicated to company’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure

Disclosure Committee is key component

CEO and CFO certification requirements


WilmerHale 49


Other Policies Clawback Policy (after SEC rules mandated by Dodd-Frank

Act are adopted)

Equity Grant Policy

Investment Policy

Document Retention Policy

Attorney Conduct Policy (requiring attorneys to report material violations of securities laws and fiduciary duties “up the ladder” within the company, per SEC rules)


WilmerHale 50

Corporate and Capital Structure

Delaware reincorporation, if necessary

Evaluate current corporate structure

Make sure preferred stock converts in IPO

Authorized shares – generally should be at least 3-5x the number of fully-diluted

shares outstanding upon completion of IPO

Stock split / reverse stock split – used to right-size price range (pre-road show)


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Corporate Charter and Bylaws Pre-IPO charter and bylaws will not be adequate for public

company

Public company charter and bylaws should: – eliminate preferred stock and other private company provisions

– authorize adequate number of shares of common stock for post-IPO use

– provide for indemnification of directors and officers

– implement any desired takeover defenses

Consider corporate opportunity and exclusive forum provisions


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Takeover Defenses Generally disfavored by ISS and institutional investors

Modest package is feasible in IPO – classified board

– prohibition on written consents of stockholders

– limitation of stockholders’ right to call special meetings

– advance notice requirements for director nominations

– blank-check preferred stock

– Section 203 of Delaware statute

More aggressive techniques – multi-class voting

– poison pill (can adopt post-IPO if needed)

Put in place prior to IPO (when stockholder approval is easy) © 2014 Wilmer Cutler Pickering Hale and Dorr LLP

WilmerHale 53


Takeover Defenses — Prevalence in IPO Companies Classified board – 68%

Supermajority voting – 59%

Prohibition on written consents of stockholders – 79%

Limitation of stockholders’ right to call special meetings – 87%

Advance notice requirements for director nominations – 92%

Section 203 of Delaware statute – 81%

Blank-check preferred stock – 91%

Poison pill – 3%

Multi-class capital structure – 5% Based on all U.S. IPOs, 2007-2011


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Stock Exchange Listing Most IPO companies with major underwriters can satisfy the

quantitative listing standards of Nasdaq or NYSE

Listed companies must also adhere to a comprehensive set of corporate governance standards

Should reserve ticker symbol in advance (Nasdaq permits reservation for up to 24 months)

Nasdaq is traditional home for technology and growth companies

NYSE is viable alternative for many companies, as NYSE has loosened listing standards to compete with Nasdaq


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Equity Incentives

Pre-IPO Section 409A compliance very important

Omnibus equity incentive plan – usually need new “public company” plan

– Section 162(m) compliance

– “evergreen” feature useful

Employee stock purchase plan – fallen out of favor due to accounting rules

Director grants – usually made on formulaic basis

– separate director plan not required


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Equity Incentives

Cheap Stock For 12-18 months preceding Form S-1 filing, price options

based on independent, contemporaneous valuations

In Form S-1, include robust stock compensation disclosure that is clothed in the language of the AICPA “Practice Aid”

Make supplemental “cheap stock submission” to SEC examiner once preliminary price range known

Be extra attentive to exercise price determinations for grants made after Form S-1 filing (and especially as road show approaches)


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Financial and Audit Matters

Confirm auditor independence (note that pre-IPO and post-IPO independence rules are different)

Confirm availability of all required financial statements

Consider impact of M&A deals on financial statements and IPO timing

Assess accounting issues

Develop necessary controls and procedures – SOX 404 in the wings (second Form 10-K)

– EGCs can skip ICFR audits for up to five years


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Financial and Audit Matters

Financial Statement Requirements Three years of audited financial statements (two years for

EGCs)

Must conform to “SEC GAAP”

Consider need for segment disclosures

Separate financial statements (and pro forma combined financial statements) required for completed or probable acquisitions or dispositions that satisfy significance tests under SEC Regulation S-X

XBRL data format not required until first 10-Q


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Getting Started

Assemble internal team

Select external advisors

Corporate housekeeping / diligence

Legal compliance

Governance / public company preparation

Choose underwriters

Begin Form S-1


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Getting Started

Internal Team Management

– CEO, CFO, General Counsel, Controller

– additional finance and accounting staff

– investor relations professional

Board of Directors – determine willingness of current directors to continue

– plan for possibility that VC/PE directors will leave Board following IPO

– consider skillsets, industry and public company experience, diversity

– provide adequate time to recruit new directors


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Getting Started

External Advisors Independent auditor

– continuity of audit firm helpful

– consider timing of audit partner rotation

Company counsel – IPO, public company and SEC experience essential

– Incumbency helpful

Others – compensation consultant

– investor relations firm

– financial printer

– transfer agent


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Getting Started

Corporate Housekeeping/Diligence Ensure board, committee and stockholder minutes and

consents are complete

Clean-up stock, option and warrant records

Identify notice, consent and waiver requirements

Confirm investor agreements terminate in IPO

Review financing transaction documents

Review M&A documentation

Review other corporate records

Consider intellectual property “audit”

Assess legal compliance


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Getting Started

Legal Compliance Securities laws

– employee grants (Rule 701)

– financing transactions

Privacy and information security

Employment

Sales and use taxes

Export controls

FCPA

Pending and prospective litigation


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Getting Started

Governance/Public Company Preparation

Begin to develop governance practices and policies that satisfy SEC and stock exchange requirements, meet business needs, and are consistent with company culture

Become familiar with IPO and public company topics: – potential liability

– responsibilities of directors and officers

– corporate governance requirements

– periodic reporting and public disclosure obligations

– officer certification requirements

– insider trading and reporting obligations

– post-IPO stock sales


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Getting Started

Underwriters Company should begin to cultivate underwriting relationships

6-12 months before organizational meeting

Multiple bookrunners now commonplace

Co-managers used to round out underwriting team

Consider each candidate’s track record, team members (including research analysts), commitment to the company, industry experience, distribution capabilities, aftermarket support, reputation and financial strength

If seeking discount below the 7% norm, should discuss up front, when banks are competing for the engagement


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Getting Started

Form S-1 Identify “comps”

Stage the drafting – Business

– MD&A / financial disclosures

– Management / compensation disclosures

– Risk Factors

Selling stockholders

Related person transactions

Material contracts and confidential treatment

Consider JOBS Act relief


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SEC Review

Initial comments in 27-30 days

Total of 4-5 comment letters, with quicker turnaround each time

SEC comments typically focus on financial statements (17%), business (10%), MD&A (14%), risk factors (10%), summary (10%) and executive compensation sections (8%)

Company-specific comments based on staff review of filing and other public disclosures

Time from initial filing to pricing is typically about four months


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SEC Review

JOBS Act Disclose EGC status on prospectus cover

Describe how and when EGC status may be lost

Describe exemptions that are available to the company

Indicate whether taking advantage of extended transition period for complying with new or revised accounting standards – If yes, provide risk factor indicating that financial statements may

not be comparable to those of other public companies

– If no, indicate that decision is irrevocable


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SEC Review

Non-GAAP Financial Measures Revised SEC interpretive guidance (January 2010) more

tolerant of use of non-GAAP financial measures, including in IPOs

Staff insists on compliance with applicable rules

Staff will object to non-GAAP financial measures it considers misleading, such as Groupon’s short-lived “Adjusted Consolidated Segment Operating Income”

Exclusion of recurring operating expenses viewed with skepticism


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SEC Review

MD&A Key metrics used by management to monitor and evaluate

company’s financial condition and operating performance

Known trends and uncertainties

Revenue recognition

Segment disclosures

“Cheap stock” disclosures (including FMV determinations in past 12-18 months and justification of step-up from most recent FMV determination to mid-point of price range)

Acquisition accounting


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SEC Review

Executive Compensation Disclosures More analysis in CD&A of reasons that specific compensation

decisions were made

Description of CEO’s role in determining compensation of other executive officers

Identification of peer companies used for benchmarking

Disclosure of quantitative performance targets for incentive compensation

CD&A not required for EGCs


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SEC Review

Related Person Transactions SEC staff is very attuned to nature and placement of related

person disclosures

Basic rule requires disclosure of all company transactions in excess of $120,000 in past three years in which any executive officer, director or 5% stockholder had or will have a material interest

Material relationships between company and underwriters or selling stockholders also need to be disclosed


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SEC Review

Stockholder Rights Staff’s longstanding requirement to disclose impact of anti-

takeover provisions is extending to new techniques affecting stockholder rights

If company has multi-class capital structure, staff will require prominent summary of differential voting rights on prospectus cover and elsewhere

If company has “exclusive forum” provision in charter or bylaws (requiring all stockholder claims against company or its directors to be brought in designated court), staff may ask company to address provision’s enforceability


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SEC Review

Recurring Drafting Comments Condense summary and make it more balanced

Make risk factors specific to the company

Eliminate industry and technical jargon

Substantiate leadership claims and other assertions

Reconcile inconsistencies within prospectus and when compared to company website

Remove disclaimers and mitigating language

Provide staff with industry research reports cited in prospectus and file consents for reports that are not publicly available

Add explanations provided in response letters to prospectus


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Life as a Public Company (in a nutshell)

SEC reporting (10-Ks, 10-Qs, 8-Ks)

CEO and CFO certifications (10-Ks, 10-Qs)

Intense focus on corporate governance and executive compensation

Disclosure duties and rules (Regulation FD)

Financial reporting (“SEC GAAP,” acquisition financials, non-GAAP financial measures)

Insider trading reporting and liability (Section 16)

Insider sales (lockups, 10b5-1 plans, Rule 144)

Investor relations (annual meetings, proxy statements, earnings calls, financial guidance)


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For More Information

Lisa Firenze

[email protected]

+1 212 937 7263

Brian Johnson

[email protected]

+1 212 937 7206


Wilmer Cutler Pickering Hale and Dorr LLP is a Delaware limited liability partnership. WilmerHale principal law offices: 60 State Street, Boston, Massachusetts 02109, +1 617 526 6000; 1875 Pennsylvania Avenue, NW, Washington, DC 20006, +1 202 663 6000. Our United Kingdom offices are operated under a separate Delaware limited liability partnership of solicitors and registered foreign lawyers authorized and regulated by the Solicitors Regulation Authority (SRA No. 287488). Our professional rules can be found at www.sra.org.uk/solicitors/code-of-conduct.page. A list of partners and their professional qualifications is available for inspection at our UK offices. In Beijing, we are registered to operate as a Foreign Law Firm Representative Office. This material is for general informational purposes only and does not represent our advice as to any particular set of facts; nor does it represent any undertaking to keep recipients advised of all legal developments. Prior results do not guarantee a similar outcome. © 2014 Wilmer Cutler Pickering Hale and Dorr LLP

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