Reviewing Management Structure – Are independent board members required? – (26)

Operating agreements with significant business partners that contain broad “change of control” provisions that may be triggered by the IPO.
A company, with the help of its counsel, should review all of its agreements to identify these provisions and negotiate for necessary consents or waivers with the other parties involved so that they do not jeopardize the timing of the IPO. Companies will want to avoid any last minute hold-up by a shareholder, creditor or supplier or customer that could delay the offering or require the issuer to pay a consent fee or make other concessions.
Reviewing Management Structure
Are independent board members required?
A company must comply with significant corporate governance requirements imposed by federal securities laws and regulations and the regulations of the applicable exchanges, including with regard to the oversight responsibilities of the board of directors and its committees. A critical matter is the composition of the board itself. All exchanges require that, except under certain limited circumstances, a majority of the directors be “independent,” as defined by both federal securities laws and regulations and exchange regulations. In addition, boards should include individuals with appropriate financial expertise and industry experience, as well as an understanding of risk management issues and public company experience. In addition, the exchanges require that the independent directors have regularly scheduled executive sessions.
A company should begin its search for suitable directors early in the IPO process even if it will not

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