• President Signs Capital Access Reforms
  • April 11, 2012 | Author: Patricia A. Gritzan
  • Law Firm: Saul Ewing LLP - Philadelphia Office
  • Summary

    Last week, President Obama signed into law the Jumpstart Our Business Startups Act, which is intended to spur job creation and economic growth.

    On April 5, 2012, President Obama signed the Jumpstart Our Business Startups Act (the "JOBS Act") recently approved by Congress. The JOBS Act is intended to increase American job creation and economic growth by improving access to the public capital markets for emerging growth companies. Among the key provisions of the JOBS Act are these reforms:

    • IPO On-Ramp: Facilitates initial public offerings and eases ongoing disclosure requirements for certain new public issuers with annual revenues less than $1 billion in their last fiscal year prior to their initial public offering. Qualifying issuers are called "Emerging Growth Companies."

    • Crowdfunding: Exempts certain offerings not exceeding $1 million in any twelve month period from the registration requirements of Section 5 of the Securities Act of 1933, as amended. Qualifying crowdfunded transactions will allow small businesses to raise capital from groups of people investing smaller amounts in a manner that also provides necessary protections to investors participating in these offerings.

    • Manner of Offer and Sale: Relaxes general solicitation and advertising restrictions applicable to private sales of securities exclusively to (i) accredited investors in transactions complying with Rule 506 of Rule D or (ii) qualified institutional buyers in transactions under Rule 144A.

    • Expanded Small Issues Exemption: Requires the SEC to adopt new regulations that would expand from $5 million to $50 million the current conditional exemption from registration for small issues.

    • Increased Shareholder Requirement for '34 Act Registration: Raises the threshold number of shareholders from 500 to 2,000 for a company with $10 million in total assets that triggers registration under the Securities and Exchange Act of 1934, as amended, and subjects the company to ongoing disclosures.

    SEC rule-making mandated by the JOBS Act is expected over the next six to eighteen months, so the final contours implementing these reforms will not be known until any such rules are adopted.