The SEC has unanimously approved several new rules that will have a direct effect on the disclosure obligations of small businesses and their ability to raise capital. As previously discussed, the new rules do the following:

  • Replace the current “small business issuer” category with a new “smaller reporting companies” category (defined as having less than $75 million in public equity float or revenues less than $50 million if public equity float is not calculable) and continue to require less disclosure and reporting requirements for small businesses;
  • Move certain disclosure items into Regulation S-K and allow “smaller reporting companies” to elect to comply with the scaled down version of each item on an item-by-item basis;
  • Eliminate all “SB” forms, but allow a phase-out period;
  • Permit all foreign companies to qualify as “smaller reporting companies” if they choose to file on domestic company forms and provide financial statements prepared in accordance with GAAP;
  • Shorten the holding period for restricted securities of reporting companies to six months;
  • Simplify Rule 144 compliance by allowing non-affiliates of reporting companies to resell restricted securities after 6 months and allowing non-affiliates of non-reporting companies to resell after 12 months;
  • Raise the thresholds that trigger Form 144 filing requirements; and
  • Eliminate the presumptive underwriter provision of Rule 145, except with respect to transactions involving blank check or shell companies.