Both the NYSE and NASDAQ require listed companies to have a majority of independent directors on the board, with fully independent audit, compensation, and nominating/governance committees. Venture-backed companies typically have boards composed primarily of founders and investor-designated directors, most of whom do not qualify as independent under exchange listing standards. The transition to a public company board requires recruiting independent directors with relevant industry expertise, financial acumen, and public company governance experience. Gurpreet Bal advises companies to begin independent director recruitment 12 to 18 months before the anticipated IPO, as the recruitment, vetting, and onboarding process takes time, and directors need to be familiar with the company's business and financial position before the S-1 is filed.
Pre-IPO companies must decide which anti-takeover provisions to include in their certificate of incorporation and bylaws. Common provisions include classified board structures, supermajority voting requirements for bylaw amendments and charter amendments, limitations on stockholder ability to call special meetings or act by written consent, advance notice requirements for director nominations and stockholder proposals, blank check preferred stock authorization, and exclusive forum provisions designating Delaware as the exclusive forum for internal affairs claims. Gurpreet S. Bal advises companies to evaluate each provision against institutional investor expectations and proxy advisory firm guidelines, noting that aggressive anti-takeover provisions can generate negative attention from governance-focused investors and may affect the company's governance score.
Every company going public must adopt a comprehensive insider trading policy that prohibits trading on material nonpublic information and establishes blackout periods around earnings releases and other material events. Directors, officers, and employees subject to the policy must pre-clear trades through the company's compliance function. Rule 10b5-1 trading plans, which allow insiders to establish predetermined trading instructions during an open trading window, are the standard mechanism for insiders to sell shares post-IPO in a compliant manner. The SEC's 2022 amendments to Rule 10b5-1 imposed additional requirements including cooling-off periods, certifications, and limitations on overlapping and single-trade plans. Gurpreet Bal advises pre-IPO companies to adopt insider trading policies and educate directors and officers on Rule 10b5-1 plan requirements before the IPO.
Regulation FD requires public companies to disclose material information to all investors simultaneously rather than selectively disclosing to analysts or institutional investors. Private companies have no Regulation FD obligations and routinely share material information selectively with investors, board members, and potential partners. The transition to Regulation FD compliance requires establishing policies governing investor communications, analyst interactions, conference presentations, and social media activity. Gurpreet S. Bal advises pre-IPO companies to implement Regulation FD policies and train management and investor relations personnel on the requirements before the IPO to avoid inadvertent violations during the initial post-IPO period.
Gurpreet's observation: board composition is not easier just because you have a controlled company structure — it is often harder. As a private company, you are not walking in the door with many independent directors or board members of diverse backgrounds to begin with. A controlled structure means you have more considerations to work through when you get to a public company board, not fewer. On insider trading policies: outside counsel needs to drive the drafting process, not review the result. When the policy is built internally, the interests and politics inside the company — who wants flexibility, who is planning to sell, who is protecting certain executives — quietly shape what ends up on the page. Very experienced in-house counsel can lead it, but outside validation needs to happen at the drafting stage, not at the end.
Gurpreet S. Bal is a Partner at Foley and Lardner LLP in Silicon Valley, where he advises startups, founders, and investors on venture financings, M&A, IPOs, and corporate governance. He has represented clients in hundreds of transactions with aggregate deal value exceeding $60 billion across AI, semiconductors, fintech, and emerging technology. Gurpreet's recent IPO experience includes leading company representation in the only sub-$1 billion U.S. semiconductor IPO in 2024.