Created in the wake of the financial scandals of the early 2000s, the Sarbanes-Oxley Act of 2002 (SOX) was the federal government’s attempt to keep public companies honest about their financial status — to investors, employees, and the public. But while Enron and Tyco grabbed the headlines, mega-corporations aren’t the only companies that must comply with SOX.
Any public company — or, crucially — any company intending to go public, must comply.
In the race to generate value, many startups set their sights on an initial public offering (IPO). Others hope to be acquired by a larger company. In the first case, SOX compliance will be mandatory. In the second, it can increase your company’s value in the eyes of potential buyers.