Yesterday (March 22), the Senate passed the Jumpstart Our Business Startups Act (JOBS Act), which could make it easier for startups and other small businesses to raise capital. The bill now goes back to the House, which passed a similar bill two weeks ago, for the reconciliation process, which may occur as early as next week. Some of the proposed changes to federal securities laws in the bill would:
- Exempt, for up to five years, “emerging growth companies” (those with under $1 billion in annual gross revenues) from certain financial reporting obligations, auditor attestation of internal controls, and requirements of the Dodd-Frank Act, allowing such companies to conduct an IPO and become a public reporting company at a lower cost, with the expectation that more companies will be willing and able to go public;
- Permit general solicitation and advertising in private offerings under Regulation D to “accredited investors”, with the goal of allowing emerging companies to locate investors more easily;
- Reduce (or postpone) public disclosure requirements for private companies, by allowing up to 2,000 shareholders (instead of the current limit of 500) before requiring registration with the SEC, with the goal of allowing private companies to go public when they desire rather than being forced to do so when they exceed the existing 500 shareholder limit;
- Increase to $50 million from $5 million the amount by which securities may be offered/sold in so-called Regulation A offerings; and
- Exempt crowdfunding (use of the Internet to obtain small investment amounts) for equity investments conducted by certain intermediaries registered with the SEC, with the intent to allow small businesses to access more investors.