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The Sarbanes-Oxley Act of 2002 (Sar-Ox), signed into law in 2002, is one of the most significant changes ever legislated to federal securities law. The most important provisions of Sar-Ox include:
- Accelerated reporting of trades by insiders
- Public reporting of CEO and CFO compensation and profits
- Auditor independence and a prohibition on audit firms offering value-added (“conflict of interest”) services
- Companies are now required to have an internal audit function, which must be certified by external auditors
- Certification of financial reports by CEOs and CFOs
If you’re involved with a corporation, then you need to be aware of these changes and take the needed steps to reach compliance. Otherwise, it can potentially cost you big bucks when the SEC comes a knockinâ.Â
If you are a small corporation and think this law wonât impact you, think again. One of the most common ways that small companies and startups become major successes and achieve âliquidityâ? is by being acquired by larger, typically, public companies. So, if down the line, one of your goals is to take your corporation public, or maybe even sell it and retire, Sar-Ox will definitely figure into your future plans. How?
Letâs say that a large corporation wants to buy your company. One of the first things they are going to want to see is your financials. If you have had an experienced, professional financial officer managing your profit and loss statements properly, and you have been attempting to remain compliant with Sar-Ox, your chances of having your company sell increase significantly.
The short answer is if you have big plans for your company in the future, then you need to become familiar with the basic regulations and requirements of Sar-Ox. For more information, check out the Securities & Exchange Commissions FAQ page . Wikopedia also provides an excellent overview of this law.
Havenât taken the necessary steps of incorporating your business yet? https://incparadise.net can help.
