Capital Formation Reform Pushed into Overdrive by the “JOBS” Act

9 March 2012
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Key takeaways:

Reform efforts regarding capital formation in the United States were given a forceful push towards reality with the passage by the House of Representatives on March 8 of H.R. 3606, the “Jumpstart Our Business Startups Act” (colloquially referred to as the “JOBS” Act). The JOBS Act is intended to increase capital formation, spur the growth of startups and small businesses and pave the way for more small scale businesses to go public. As passed by the House would specifically and most significantly:

  • Ease access to the public capital markets for a newly created category of “emerging growth companies.”
  • Eliminate the prohibition against “general solicitation or general advertising” in certain private offers of securities.
  • Facilitate capital formation by start-up companies through “crowdfunding.”
  • Increase the Regulation A offering threshold for securities exempt from SEC registration from $5 million to $50 million.
  • Relax the trigger for public company reporting requirements and regulation by increasing the shareholder of record threshold from 500 to 2,000 (or 500 non-accredited shareholders).