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To: maceng2 who wrote (199710)	10/23/2002 7:36:02 PM
From: maceng2	Read Replies (1) \| Respond to of 436258

Go private... Companies may delist to avoid tougher rules By Robert Clow in New York news.ft.com Dozens of quoted US companies are considering going private to avoid new corporate governance legislation and tough disclosure rules introduced by the Securities and Exchange Commission. Securities lawyers say a number of smaller companies are looking at delisting because of the burdens imposed by the new regulations. The threat has concerned the Nasdaq market, which is working with the SEC to try to limit the impact on small companies of the Sarbanes-Oxley legislation introduced in the wake of recent corporate scandals. Charles Nathan, a partner at Latham & Watkins in New York, said Sarbanes-Oxley had "significant liability implications" for smaller companies many of which were already weighing the costs and benefits of retaining the listings. "It is a lot of straws on the camel's back," said Mr Nathan, whose firm is already advising four Californian software companies about going private. Benjamin Stapleton, a partner at Sullivan & Cromwell, said: "People have not had to deal with [the new regulations] yet. Some of this stuff, to do right, is going to be a significant cost and headache for smaller companies." Under Sarbanes-Oxley, directors can be held personally responsible for mis-stating their companies' figures. Businesses will also be required by new rules to recruit a majority of independent board members. Lawyers say this has led to a steep increase in the costs of insurance to cover potential action against directors. "One of the areas that is problematical is repopulating boards with independent directors," said Ed Knight, general counsel of Nasdaq. "For a lot of companies that would require a large increase in the number of directors." Mr Knight said most Nasdaq-listed companies seemed willing to take on the additional regulatory burdens. But he acknowledged that it was a further disincentive for companies to maintain their listings. Many complain about the decreasing liquidity in their shares and believe they will not be able to raise money from the public markets for some time. The problem could worsen if regulators reforming the way Wall Street equity research is offered make it uneconomic for securities firms to cover smaller companies. "We are concerned about the reduction of resources for covering companies that are already not that widely covered," said Mr Knight. Companies looking to delist are increasingly turning to US private equity firms, which are awash with $100bn of cash. "We have been receiving calls from smaller public company executives who are looking at going private," said Avy Stein, managing partner at Willis Stein, a mid-market buy-out firm based in Chicago.