and “ OSC Provides Guidance on Special Committees and Disclosure in Conflict of Interest Transactions: The HBC Privatization Part II . ” 5 Whether or not required by law, striking a special committee is more widely considered a best practice that can provide a significant degree of protection to a board and help mitigate concerns about actual or perceived conflicts of interest when they exist. And increasingly, as discussed below, such committees are being used both in the transactional context and in dealing with major legal proceedings, investigations and other high-stakes situations that issuers encounter. Special Committees as a Governance Best Practice Beyond potential significant transactions, there are many other instances in which boards will consider striking a special committee as a governance best practice. These include significant “bet-the-house” litigation, sensitive internal investigations and shareholder activism matters. While some boards also set up special committees to address unexpected crises, like the COVID-19 pandemic, this work can also be carried out by a standing or ad hoc committee of the board. In each case, a variety of factors will influence the optimal process to put in place.
Whether or not required by law, striking a special committee is more widely considered a best practice that can provide a significant degree of protection to a board and help mitigate concerns about actual or perceived conflicts of interest when they exist.
REASONS TO STRIKE A SPECIAL COMMITTEE
In the above scenarios and others, an issuer and the board itself may derive many benefits from setting up a special committee comprised of a subset of board members. First and foremost, as a smaller group, a committee will often be better able to focus on, analyze and consider the relevant issues, especially in cases where time is of the essence.
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Governance Insights 2020
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