EGC Corporate Governance Practices (May 2018)

A Survey and Related Resources PAGE B-1 APPENDIX B EMERGING GROWTH COMPANIES Emerging Growth Company – Benefits  Permits submitting a registration statement with the SEC on a confidential basis.  EGCs may engage in oral or written communications with QIBs and institutional accredited investors in order to gauge their interest in a proposed IPO (i.e., “test-the-waters”) either prior to or following the first filing of the IPO registration statement.  Requires EGCs to provide only two years of audited financial statements to the SEC (rather than three years) and delays the auditor attestation on internal controls requirement.  Permits EGCs to omit financial information for historical periods otherwise required if the EGC reasonably believes such information will not be required at the time of the contemplated offering.  Foreign Private Issuers that are EGCs will continue to be entitled to all of the other disclosure benefits available to them as FPIs (such as, for example, reduced compensation disclosure requirements, if permitted by home country practice).  EGCs are exempt from:  The mandatory say-on-pay vote requirement;  The Dodd-Frank Act-required CEO pay ratio rules and may use certain smaller reporting company scaled disclosure;  Any new or revised financial accounting standard until the date that such accounting standard becomes broadly applicable to private companies; and  Any rule requiring mandatory audit firm rotation or a supplement to the auditor’s report that would provide additional information regarding the audit of the company’s financial statements (no such requirements currently exist).  An EGC may forego reliance on any exemption available to it. However, if it chooses to comply with financial reporting requirements applicable to non-EGCs, it must comply with all such standards and cannot selectively opt in or opt out of requirements.  Any election must be made at the time the EGC files its first registration statement or Exchange Act report.