BusinessCompany NewsNo protection from delisting

No protection from delisting

Delisting from equity markets is unlikely to protect companies from the knock-on effects of the controversial Sarbanes-Oxley Act, lawyers have warned.

Link: Sarbanes-Oxley special report

Speaking at a seminar on the influence of Sarbanes-Oxley in the UK and Europe, Alex Cohen, a US corporate partner at Latham & Watkins, said that most firms would still have to comply with the vast majority of the Act even if they did remove themselves from the public market.

‘Only a small part of Sarbanes-Oxley actually applies purely to listed companies,’ said Cohen. ‘If a company is registered with the Securities and Exchange Commission and has 300 employees or more then Sarbanes-Oxley, for the large part, will still apply to that company.’

Cohen’s advice follows on from the high-profile case of Porsche, which last month withdrew its plans to list on the New York stock exchange citing the extra-territorial influence of Sarbanes-Oxley as a decisive factor, and threats from several other firms to pull out of the markets in order to avoid the Act.

Also at the seminar, Wayne Carlin, a regional director of the US financial watchdog, the Securities and Exchange Commission, acknowledged the concerns of non-US companies that would be affected by the Act but admitted that it would be some time until these concerns were addressed.

‘At the moment there is no distinction made in Sarbanes-Oxley between US companies and those based elsewhere,’ said Carlin. ‘We realise there are issues and concerns with this but over the next few months the bulk of our resources will be turned over to implementing the Act. But we are still listening with interest (to parties) from foreign jurisdictions and we will move onto that issue as soon as we can.’

But Gay Huey Evans, director of market and exchanges at the Financial Services Authority, claimed UK companies had little to fear from the effects of Sarbanes-Oxley.

‘From all we have learned from Maxwell, Polly Peck and others there are still issues of concern although perhaps not driven by serious malpractice,’ she said. Evans added that the UK needs to continue being vigilant and, as long as duplicate enforcement is avoided, Sarbanes-Oxley could help with this.

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