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Summary
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Covers
state and federal laws governing
corporate loans to insiders
- Sarbanes-Oxley Act banned personal loans to
directors and executive officers by public companies and other issuers
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Statutes
Notable
Cases
Sarbanes-Oxley
Act
§ 402
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Statutory ban on personal loans to
directors and executive officers by issuers
Applies
to "any director or executive officer
(or equivalent thereof) of that issuer"
Applies
to material modification or renewal of
any pre-existing loan
- Makes
exceptions for financial institution issuers
- Doesn't
apply to registered investment companies
per Sox Act § 405
25 firm joint interpretive memo (2002)
Addresses interpretive issues for § 402, including:
SEC_CODE_REF_0090001192884
- Travel expense and similar advances
- Personal use of company credit card
- Personal use of company car
- Relocation payments
- "Stay" and "retention" bonuses
- Indemnification advances
- Deferred compensation
- Leveraged co-investment
- Tax indemnity payments
- Loans to subsidiary's executive officers
- Loans from 401(k) plans, annuities, other
benefit programs
- Cashless option exercises
- Securities-related loans
- Drawdowns on pre-existing commitments
- Pre-existing demand loans
- Forgiveness of pre-existing loans
- Modifications favorable to issuer
Latham & Watkins memo
statutory construction
of § 402
Exemption
for foreign banks
Developments
- Nexstar Broadcasting IPO 11.17.03
Discloses that CEO will be paid a $4.0 mm IPO "success fee"
which will pay off pre-existing loan guaranteed by issuer
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Related Topics
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