Controlled Company Governance Checklist

Document type: Checklist Practice area: Corporate — Corporate Governance Jurisdiction: United States (Delaware and exchange listing standards) Last reviewed: 5 September 2026

Section 1 — Board composition

• Majority of directors independent; exemptions declined and the decision documented
• Audit committee fully independent (never exempted)
• Compensation and nominating committees fully independent
• At least three directors available for a conflicts committee
• Lead independent director appointed, with a written charter
• Executive sessions of independent directors at every meeting
• Board refreshment and evaluation practices in place

Section 2 — Independence, assessed substantively

For each director, annually:

• Employment or consulting with the controller or affiliates, current or recent
• Business relationships between the director's enterprise and the controller's group — including revenue concentration
• Family relationships
• Co-service on the controller's other boards
• Materiality of director fees to the director's income
• Social, charitable, educational, and fiduciary entanglement
• Any interest in a pending transaction
• History of dissent, as a soft indicator
• Transaction-specific reassessment whenever a conflicts matter arises

Section 3 — Conflicts committee

• Written charter adopted
• Jurisdiction defined: all controller and affiliate transactions above a threshold; controller compensation; any transaction where the controller's interest differs
• Authority to reject definitively stated
• Authority to retain its own advisers at company expense without further approval
• Board resolution: the board will not approve a covered transaction without the committee's favorable recommendation
• Standing counsel engaged; financial adviser identified in advance
• Meets at least quarterly whether or not there is business
• Minutes record analysis and dissent, not attendance
• Role described in the annual proxy statement

Section 4 — Related-party transaction program

• Live schedule built from AP, AR, the lease register, and the contracts database — not from memory
• Each entry records: counterparty, relationship, term, renewal, annual value both directions, pricing methodology, last benchmarked, approval basis
• Written policy with a per-transaction threshold and an aggregate threshold
• Pre-approval required; ratification after the fact is not the process
• Arm's-length pricing standard with a defined methodology
• Benchmarking performed in both directions — above-market and below-market arrangements are both problems
• Annual review of every recurring arrangement: continue, renegotiate, or terminate
• Company-side termination rights
• Corporate opportunity treatment defined and disclosed
• Disclosure consistent year over year

Section 5 — Controller compensation

• Fully independent compensation committee, assessed substantively
• Committee's own consultant, retained by and reporting to the committee
• Consultant's other work for the company disclosed
• Peer group constructed and its construction documented
• Evidence of negotiation: counterproposals and movement
• Performance conditions demanding and measurable
• Considered over multiple meetings, not one
• For extraordinary awards: separate ratifying vote of the disinterested shares, with the controller abstaining
• Disclosure explains the reasoning, not only the numbers
• Understood that say-on-pay is not a ratifying vote

Section 6 — Administering the dual-class structure

• Named owner in the legal department for sunset monitoring
• Calendar built for each trigger
• Ownership-based trigger: controller's holdings computed the way the charter computes them, at least quarterly
• Time-based trigger: date and extension mechanics, including who votes on any extension
• Departure trigger: alert on any change in the controller's title or responsibilities
• Death and incapacity: determination process identified in advance
• Every proposed transfer of high-vote shares reviewed against the permitted transfer definitions before it occurs
• Transfer agent instructed to act only on written company confirmation
• Conversions documented and disclosed

Section 7 — Executing a controller transaction

In this order. Sequence is what fails.

• Identify the transaction as a controller transaction early — do not characterize it as ordinary course
• Impose both MFW conditions before any economic negotiation, in writing, non-waivable
• Activate the conflicts committee by board resolution with transaction-specific authority
• Reassess each member's independence as to this transaction
• Committee retains its own advisers — selected by the committee
• Committee obtains ordinary-course projections; interrogates any revision and records the answer
• Negotiation conducted visibly: counterproposals, movement, willingness to stop
• Minority vote population defined precisely; tabulation method confirmed with the transfer agent before the proxy is filed
• Disclosure complete: committee process, adviser analyses and conflicts, all projections, controller's interest, management arrangements
• Conditions not waived at any point

Section 8 — Succession

• Charter addresses death and incapacity, with a transition period
• Determination process for incapacity identified and workable
• Interim voting of the high-vote shares addressed
• Succession plan reviewed annually by independent directors in executive session
• Emergency and planned succession both covered
• The conversation with the controller held, and minuted
• Post-sunset readiness: advance notice bylaws, shelf rights plan, engagement program

Section 9 — Disclosure consistency

Review annually, comparing:

• Charter class descriptions
• Risk factors, including sunset terms
• Beneficial ownership tables — economic and voting percentages both
• Governance section
• Controlled company exemption disclosure
• Related-party transaction disclosure
• Conflicts committee description

Section 10 — Red flags

• Relying on exemptions without a documented reason
• A conflicts committee that has never rejected anything
• Committee advisers suggested or introduced by the controller
• MFW conditions imposed after negotiations began
• Affiliate arrangements never benchmarked
• A high-vote transfer approved after execution
• Minutes recording attendance rather than analysis
• Risk factors describing a structure the charter no longer contains
• Succession deferred for more than one annual cycle
• Independent directors with no recorded dissent, ever

Section 11 — Twelve-month build for a company starting from nothing

Months 1–2, assess. Map the controller's economic and voting position and confirm how each is computed under the charter. Build the related-party schedule from source systems. Run substantive independence assessments. Identify which exemptions are relied on and why.

Months 3–4, constitute. Adopt the conflicts committee charter and appoint members. Adopt the related-party policy with thresholds and pre-approval. Adopt a lead independent director charter. Confirm the audit committee's independence. Decide deliberately on each exemption.

Months 5–7, clean up. Benchmark every recurring affiliate arrangement. Renegotiate those off market in either direction. Terminate those the company does not need. Document the approval basis for each that continues. Audit every high-vote transfer since listing against the permitted transfer definitions.

Months 8–9, retain and rehearse. Engage standing committee counsel. Identify a financial adviser available on short notice. Walk the committee through a hypothetical controller transaction under the MFW framework so the sequence is understood before it is needed.

Months 10–11, sunsets and succession. Assign the sunset owner and build the calendar. Establish pre-transfer review with the transfer agent. Hold the first executive-session succession discussion and the conversation with the controller.

Month 12, disclose and reconcile. Run the consistency review. Describe the conflicts committee's role in the proxy. Report vote results excluding the controller's shares.

Section 12 — Quarterly conflicts committee agenda

Use the same agenda every quarter. Consistency is what makes the record credible.

1. Related-party schedule review. New arrangements since last meeting; changes to existing ones; anything approaching a threshold.
2. Benchmarking status. Which arrangements are due; results of any completed work; action on off-market findings.
3. Pending or anticipated controller matters. Anything management is aware of, however preliminary — the committee should hear about a potential transaction before the conditions must be imposed.
4. Adviser matters. Confirmation that standing counsel is engaged and conflicts-free; any need to identify additional advisers.
5. Executive session without management or any controller-affiliated director present.
6. Minutes review of the prior meeting, confirming they record the analysis.

Section 13 — Independence scoring worksheet

Score each director annually. A single soft factor rarely disqualifies; a cluster does.

How to use it. Interview each director personally; questionnaires under-report social, charitable, and family connections because directors do not think of them as business relationships. Where a director is close to the line, exclude them from the conflicts committee rather than defending the inclusion later. The cost of a smaller committee is administrative. The cost of a committee member found not independent is entire fairness review of everything that committee approved.

Section 14 — Documents to have on file at all times

• Charter, with all amendments, and a current summary of each class's rights
• Conflicts committee charter and current membership
• Lead independent director charter
• Related-party transaction policy
• Current related-party arrangement schedule with benchmarking dates
• Independence assessments for the current year
• Standing engagement letters for committee counsel
• Sunset calendar with the named owner
• Permitted transfer review log
• Succession plan and the date of the last executive-session review
• Disclosure consistency review for the current year
• Vote results by proposal, including results excluding the controller's shares

Related documents

• Dual-class stock and controlled companies: voting power, sunsets, and the limits of founder control
• Governing a controlled company: a practical guide
• Dual-class toolkit: charter provisions, sunset mechanics, and conflict procedures
• Going-private transaction checklist
• Books-and-records demand checklist