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

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

Quick Start

Gather prerequisites above; confirm listing status before applying exchange rules.
Complete the regime map (Step 1 below).
Draft charter sections in the prescribed order (Step 2).
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 |

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