Special Committees: Frequently Asked Questions

A. Purpose and Formation

1.What is the role of a special committee and when should a board appoint a special committee?

A special committee is established by a board of directors to review the merits of a specific transaction or corporate governance issue. A special committee is sometimes called an ad hoc committee because it exists for a specific function and for a limited duration, unlike the standing committees of the board (e.g., an audit committee or a governance committee).

The most common reason for forming a special committee is to address situations where there is an actual or perceived conflict of interest between the corporation and specific stakeholders such as management or a significant shareholder.