The history of foreign private issuers, also known as International Companies, on the New York Stock Exchange is filled with illustrious corporate brands. Recent annals are also spotted by myths and misperceptions about listing requirements for international companies. These misperceptions persist despite changes made by U.S. regulators and self-regulatory organizations (like the NYSE). Here’s a look at the reality.
Requirements That Don't Apply to International Companies
There are certain rules and regulations that apply to publicly listed companies based in the U.S., and not to foreign private issuers. International companies do not have to meet the following requirements:
- Report on a quarterly basis. Unlike domestic filers (with their 10-K and 10-Q filings), international companies file their annual report as a 20-F and interim reports (minimum frequency is set by home country requirements) are submitted, like any press release, on a Form 6-K.
- Have a majority independent board. The independence test is focused on the Audit Committee. The Audit Committee can consist of one person.
- Have a compensation or nominating committee. The only committee required for an international company is the Audit Committee.
- Receive shareholder approval for equity compensation or other stock issuances.
Options International Companies Listing in the U.S. Can Choose to Follow
- Use IFRS (in its original IASB version) instead of U.S. GAAP. While not an option (yet) for U.S. Companies, rule changes passed in 2007 enable international companies to use IFRS reporting language in their filings.
- Follow home country corporate governance practices. Numerous corporate governance requirements adhered to by U.S. companies are not required for foreign private issuers. Among the most notable: U.S. proxy rules do not apply to International Companies. For the proxy process, international companies are only required to solicit proxies from their U.S. holders. In doing so, they do not need to use a proxy statement compliant with the U.S. rules.
- List ADRs or Common Shares (same requirements). A company (whether it is a dual listing or a single listing) is not limited to using only ADRs.
Mandates for International Companies
International companies are REQUIRED TO follow select key provisions of the Sarbanes Oxley Act or SOX:
- Have an independent audit committee, which can be as small as one member.
- Abide by the internal control requirements of SOX 404 (Internal Controls). However, continuous cost reductions with the elimination of excessive testing (materiality) and documentation have decreased the burden on listed companies.
This snapshot of requirements that don’t apply to foreign companies—and those that do--should not to be mistaken for legal advice. Please check with any member of the NYSE team on details. We are at your disposal.