Senate Agrees with House on Need for Capital Formation Reform and Passes the "JOBS" Act

23 March 2012
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Key takeaways

Yesterday, the Senate passed the Jumpstart Our Business Startups Act (the “JOBS” Act), with modest amendments to the House version. 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. Before it becomes law, the differences between the House version and the Senate version must be resolved. The Act as passed by both houses would: 

  • 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).