On April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups Act of 2012, the JOBS Act. The Act implements measures relating to the IPO process and reporting requirements for a new category of issuer known as the “emerging growth company,” or EGC. The Act defines an EGC as a company with annual gross revenues of less than $1 billion during its most recent fiscal year. A company will retain its EGC status until the earliest of:
· The first fiscal year after its annual revenues exceed $1 billion.
· The first fiscal year following the fifth anniversary of its IPO.
· The date on which the company had, during the previous three-year period, issued more than $1 billion in non-convertible debt.
· The date on which the company qualifies as a large accelerated filer.
The Act amends applicable federal securities laws to exempt EGCs from:
· The requirement to publicly file an IPO registration statement. An EGC may confidentially submit its registration statement and any amendments to the SEC.
· The requirement to include three years of audited financial statements in an IPO registration statement. EGCs only need to include two years of audited financial statements. Likewise, the MD&A need only include two years of discussion and analysis.
· Restrictions on communications ahead of public offerings, provided the EGC communicates only with qualified institutional buyers or accredited investors. This allows EGCs to “test the waters” before a contemplated offering.
The Act also eases the rules on research relating to …