How to Understand the SEC Compliance Laws for Corporate Board Meetings

The U.S. Securities and Exchange Commission (SEC) compliance laws you need to follow for corporate board meetings depends on your company's organization and charter. Follow these steps to ensure that your organization doesn't violate SEC guidelines.

Instructions

Difficulty: Easy

Things You’ll Need:

• Phone
• Computer with Internet access

1. Determine which laws apply to your board of directors. SEC compliance laws for board meetings vary between controlled companies, limited partnerships, foreign private issuers and business development companies. For specific guidelines on SEC compliance laws for board meetings, visit the SEC Web site (see Resources below).
2. Make sure the members of your company's board of directors and audit committee are considered "independent." To be considered independent, the board must determine that the individual has no relationship with or a vested interest in the corporation. These members cannot be shareholders, officers or partners of the corporation, as defined by stock exchange standards.
3. Be sure all the company's financial transactions are reviewed. They can be checked over by either an audit committee that reports to the board of directors, or the board of directors itself. The audit committee must meet at least quarterly to comply with SEC corporate regulations.
4. Announce any changes or vacancies in the board of directors at each board meeting. This is required of all publicly-listed companies.
5. Schedule board meetings on a quarterly basis, or more frequently. SEC law states that board meetings must take place at least once a quarter. An additional session of independent members has to be held at least once a year.
6. Ensure your business possesses a formal written charter with clearly defined nomination processes for members of the board of directors and audit committee.
7. Document the procedure by which each member of the board of directors was nominated and approved. Usually, this means having a nominating committee that is made up of independent directors.
8. Retain proof of the process by which compensation of the company's officers is approved or disapproved. In order to meet SEC compliance laws, all compensation increases must be decided either unanimously or by simple majority of all independent directors. For more information, consult the SEC's page on Executive Compensation (see Resources below).
9. Create a code of ethics that the board of directors must follow during board meetings. This code must be provided to all board members prior to the first board meeting and must be redistributed when changes occur.

Tips & Warnings

• If you need help figuring out which forms you need to file with the SEC, consult its "Description of SEC Forms" Web page (see Resources below).
• Expect to spend about 2 hours preparing written materials for each board meeting, and another 1 to 2 hours reading materials others have prepared.
• If you do not conduct your corporate board meetings in compliance with SEC laws, you run the risk of SEC-imposed audits, fines or even criminal prosecution, depending on the degree of wrongdoing.
• Remember that the compliance rules change based on your status as a small business filer, business development company, limited partnership or controlled company.