One overlooked but potentially significant ramification of the Sarbanes-Oxley requirement that public companies establish and maintain disclosure controls and procedures, is the impact this mandate may have on the way such companies document significant corporate transactions. The requirement makes it necessary to conduct ongoing, active and systematic monitoring of corporate contractual obligations to deal with any potential disclosure issues arise from non-compliance. As a result, overly complicated contract documentation may actually enhance the risk that technical defaults are not systematically detected and reported, or that the nature of complex contractual obligations cannot accurately be explained to senior management through the disclosure process. This may result in potential liability to SEC-registered issuers for failure to maintain adequate disclosure controls and procedures, independent of whether the substance of the issuers' disclosure complies with SEC requirements.
5 Rich. J. Global L. & Bus. 1 (Winter 2005)
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