Sarbanes Oxley Public Companies Going Private

In the wake of the Enron and Worldcom scandals, the Sarbanes Oxley Act was created to inspect and monitor companies in an attempt to protect shareholders and investors of the companies.

The Sarbanes Oxley Act, created to prevent further corporate scandals such as Enron and Worldcom, has imposed burdens on the small public companies.

The act instituted more recordkeeping regulations that make it difficult
financially for small public businesses to follow, whereas large companies have the funds and infrastructure to comply. The Sarbanes Oxley Act will
force small companies to impliment more complex record-keeping methods, which will require new directors and financial experts for audit committees. Furthermore, it is typically harder for smaller companies to recruit these figures.

In addition to the Sarbanes Oxley regulations is the downturn in the public capital markets, which won't allow public companies to gain access to investment capital in public markets as easily because it is closed to most small companies. In going private, the group or individual in the company acquire the controlling equity interest of the company, meaning that a larger portion of the company belongs to those or the individual
within the company and not so much outside investors.

Going private can be done in many ways, some of which are through an open market purchase, a Regulation 14D tender offer, a cashout merger, and a leveraged buy-out among others. For instance, in a open market purchase, an outside investor may buy
a large portion of the company's stock or even when the company itself buys a majority of its own stock. In a leveraged buy-out, investors buy the company buying out public shareholders.

 

 

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