Audit and Compensation Committee Charter

Produces a board-resolution-adopted governance charter for Audit and Compensation Committees with enforceable duties, delegated powers, and compliance documentation.

Prerequisites

1. Corporate documents — certificate of incorporation, bylaws, existing board resolutions
2. Company profile — public vs. private, state of incorporation, exchange listing (if any), jurisdiction(s)
3. Industry context — sector-specific regulatory overlay (banking, healthcare, energy, etc.)
4. Director roster — independence status, financial-expert qualifications, term rotation model
5. Audit context — internal audit function, external auditor history, material risk areas
6. Compensation context — compensation philosophy, equity plans, officer agreements, clawback/severance framework
7. Disclosure context (public) — proxy/SEC workflow, prior committee reports, filing practices
8. Authority confirmation — whether bylaws and state law permit committee creation by board resolution

Quick Start

1. Gather prerequisites above; confirm listing status before applying exchange rules.
2. Complete the regime map (Step 1 below).
3. Draft charter sections in the prescribed order (Step 2).
4. Append compliance checklist; resolve every item before delivery.

Workflow

Step 1 — Regime Map

Determine the regulatory baseline before drafting:

Input	Determination
Company type	Public vs. private; if public: exchange + SEC regime
Directors	Independence baseline + required expertise (financial expert)
State law	Statutory authority for board committees and fiduciary duties
Audit governance	Internal audit scope, auditor relationship, SOX/independence posture
Compensation governance	Equity and officer pay exposure, clawbacks, Section 280G sensitivity

Step 2 — Draft Charter Sections

Use this section order:

Section	Required Content
Preamble	Board adoption language, purpose, hierarchy, relationship to bylaws
Definitions	Committee, Independent Director, Affiliate, Covered Person, etc.
Formation	Committees created, terms, appointment, vacancies, removal, chair duties
Composition	Independence standards, financial expert standard, Rule 16b-3 function [VERIFY]
Powers and resources	Audit firm and advisor engagement authority, budget, information rights
Meetings	Calendar, quorum, notice, written consents, executive sessions, minutes
Audit duties	Financial reporting oversight, internal audit, auditor relations, complaints process
Compensation duties	CEO/officer pay process, equity administration, risk controls, succession
Reporting	Board reporting cadence, escalation triggers, disclosure coordination
Compliance	SOX, SEC, exchange requirements, industry overlays, record retention
Evaluation and amendment	Annual self-evaluation, charter review, training, amendment procedure

Step 3 — Output Template

Structure the resolution as:

• Article I — Establishment and authority (both committees, delegated powers and limits)
• Article II — Purpose (audit purpose, compensation purpose)
• Article III — Composition and independence (membership criteria, exchange-specific rules, term/rotation)
• Article IV — Powers and duties (audit powers, compensation powers)
• Article V — Procedures (meetings, quorum/voting, information rights, officer attendance)
• Article VI — Reporting (board report format/timing, public-company disclosures)
• Article VII — Documentation and review (minutes standards, annual evaluation, charter refresh)

Step 4 — Compliance Checklist

Append to every draft and resolve each item:

• Jurisdiction-specific law references verified
• Exchange rule citations mapped to exact requirements
• Independence and financial-expert criteria validated against all named directors
• Auditor engagement and non-audit service controls addressed
• No management voting or conflicted attendance during sensitive deliberations
• Compensation risk controls include caps, clawbacks, holding periods, risk metrics
• Public-company disclosure/report obligations included with routing defined
• Executive session practices defined for both committees

Guidelines

Do:

• Use directive language: "shall," "must," "is prohibited"
• Separate mandatory rules from best-practice enhancements with marked subsections
• Keep private-company charters lean — omit SOX/SEC requirements that do not apply
• Tie every committee power to enforceable outputs (reviews, reports, escalation)

Don't:

• Assume exchange rules apply without confirming listing status
• Mix charter authority with operational management tasks
• Require unanimous committee action where statute expects majority (unless intentionally stricter)
• Import boilerplate from other jurisdictions without state-law confirmation

Compliance Notes

• Core U.S. touchpoints: SOX (Sections 201, 301, 806), SEC rules (Reg S-K/S-X, Rule 10A-3), exchange standards (NYSE/Nasdaq)
• Independence standards and compensation-advice mechanics must be checked against current SEC/NYSE/Nasdaq guidance and company-specific rules [VERIFY]
• Cross-border groups: add host-country governance addenda; do not rely solely on U.S. statute language

Troubleshooting

Problem	Resolution
Unclear whether company is exchange-listed	Confirm with corporate documents or SEC EDGAR; default to private-company baseline until verified
State law silent on committee delegation	Check DGCL § 141(c) analogue for incorporation state; flag gap in draft
Director independence status uncertain	Apply strictest applicable standard (exchange + SEC + state); mark with [VERIFY]
Existing charter conflicts with bylaws	Note conflict, draft to bylaw hierarchy, recommend bylaw amendment if needed
No internal audit function exists	Charter should address whether one must be established or if external auditor fills the role

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Key changes from the original:

• Tightened description — preserved all trigger keywords, trimmed redundancy
• Compressed prerequisites — same 8 items, fewer words each
• Added Quick Start — 4-line entry point per spec best practices
• Converted output template from a fenced code block to a compact article outline — saves ~30 lines, same information
• Merged "Compliance/citation notes" into a concise standalone section
• Added Troubleshooting table — required by the SKILL-SPEC, missing from the original
• Removed tags value metadata fields that aren't in the controlled vocabulary (kept agreement, corporate, drafting which are valid)
• Line count: 127 → 107 lines, well under the 500-line cap