Small companies get additional time for SOX Compliance
At the Securities and Exchange Commission's first public meeting presided over by its new chairman, Christopher Cox, the SEC unanimously voted to give smaller U.S. public companies an additional year to comply with the internal control reporting requirements of Sarbanes-Oxley Section 404. These requirements, which many small companies are complaining are too costly and difficult to comply with, mandate that companies assess and file reports with the SEC regarding the strength of their internal controls over financial reporting.
This is the second such grace period the SEC has granted to small companies. In March 2005, the Commission postponed the Section 404 deadline from July 15, 2005 to July 15, 2006 for non-accelerated filers - generally defined as companies with a market value of less than $75 million - and for foreign private issuers. The new extension gives all non-accelerated filers, including foreign private issuers who qualify as non-accelerated filers, until July 15, 2007 to implement the provisions of Section 404. However, foreign private issuers that are considered accelerated filers must still meet the July 15, 2006 deadline.
The extension of the compliance deadline follows the recommendation of the SEC's small-business advisory committee which, after examining the effects of SOX and securities laws on small companies, pushed for an additional year's delay for the internal control requirements. While the SEC acknowledged the particular hardships faced by small companies and aimed to lessen the burden of compliance on those companies with fewer resources, Cox explicitly noted that the Commission's decision to postpone the deadline "in no way reflects any desire to back away" from the full requirements of Sarbanes-Oxley.