by Karl J. Ege,Martin E. Lybecker, Danielle Benderly, and James T. Carroll
The JOBS Act's stated purpose
is to spur job creation and economic growth by improving access to capital for
emerging growth companies. To do so, the JOBS Act will make some of the most
significant changes to the U.S. securities law landscape in over a generation.
Perkins Coie experts provide an overview of the securities law changes under
the JOBS Act, as well as implications for private investment companies.
As forecast, on March 27 the
U.S. House passed the Senate's amended version of the Jumpstart Our Business
Startups Act (the JOBS Act), clearing the way for President Obama to sign the
bill into law, which occurred on April 5, 2012
The JOBS Act's stated purpose is to spur job creation and economic growth by
improving access to capital for emerging growth companies. To do so, the JOBS
Act will make some of the most significant changes to the U.S. securities law
landscape in over a generation.
Although opinions vary on whether the JOBS Act will indeed drive job creation
and economic growth or result in adverse unintended consequences, there is a
clear consensus that the impact of the JOBS Act will be fundamental and
far-reaching. Future Updates will be forthcoming as the Securities and Exchange
Commission (SEC) meets its rulemaking obligations under the JOBS Act.
Securities Law Changes Under the JOBS Act
The JOBS Act eases several existing securities laws and regulations to make it
easier and less costly for a startup or emerging growth company to raise
capital either privately or through a less-regulated initial public offering.
500-Shareholder Threshold for Exchange Act Registration. The JOBS Act
amends Section 12(g) of the Securities Exchange Act of 1934, as amended (the
Exchange Act), to raise the threshold at which an issuer must register its
securities with the SEC from 500 to 2,000 shareholders of record- provided that
fewer than 500 such holders are non-accredited investors-and provides that
employees receiving company securities under employee benefit plans are
excluded when calculating the number of record holders for this purpose.
- Relaxes Requirements
for New Category of "Emerging Growth Companies." To improve
access to capital markets, the JOBS Act creates a new category of issuer, the
"emerging growth company," with relaxed initial public offering (IPO)
- What Is an
"Emerging Growth Company"? The JOBS Act defines an emerging
growth company as an issuer with less than $1 billion in total annual gross
revenue during its most recently completed fiscal year. Such a qualifying
company will continue to be deemed an emerging growth company until the
the last day of the
fiscal year during which it has total annual gross revenue of $1 billion or
the last day of the
fiscal year following the fifth anniversary of its IPO,
the date on which it has,
during the previous three-year period, issued more than $1 billion in
non-convertible debt, and
the date on which it is
considered to be a "large accelerated filer" under the Exchange Act
(in short, when the public equity float reaches $700 million and the company
has been public for at least one year).
New Category Applies Retroactively for IPOs After December 8, 2011. The
JOBS Act also applies the definition of an emerging growth company
retroactively to any issuer meeting the requirements so long as its IPO
occurred after December 8, 2011.
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Karl J. Ege, is Senior Counsel at Perkins Coie. He returned to
private practice after serving for more than 15 years as Chief Legal
Officer for Russell Investments. While in that role he had global
responsibility for Russell's legal, compliance, internal audit and risk
management functions and was instrumental in developing Russell's
international business. Although retired from Russell, he remains a
director of the Russell 20-20 Association. At Perkins Coie Karl advises
senior executives and boards on matters involving corporate governance,
internal controls and corporate investigations. Karl is also involved in
advising the firm's investment and financial services clients and
emerging companies, as well as assisting on the firm's efforts in Asia,
Europe and Latin America.
Martin E. Lybecker
is a partner in the Perkins Coie's Business practice. Martin is
considered to be a leader in the development of the legal theories with
regard to the substantial growth of bank securities activities. He also
has considerable experience representing the insurance industry in
disputes over the authority of banks to engage in insurance
underwriting. Martin serves as counsel to investment companies and their
independent directors, investment advisers, broker-dealers, depository
institutions and their holding companies, insurance companies, and
several financial services trade associations.
is a partner at Perkins Coie, and specializes in assisting public
companies with their corporate governance and securities regulation,
reporting and compliance needs, including insider trading issues under
Section 16, Rule 144 and Rule 10b-5. Danielle's practice also focuses on
advising public and emerging growth companies, as well as individual
executives, with respect to stock-based executive compensation design
and interpretation issues, including for securities offerings, M&A
transactions and ongoing securities compliance and disclosure
obligations. Danielle is a frequent author and speaker on these issues.
James T. Carroll
is an associate in the Perkins Coie's Emerging Companies practice and
focuses his practice on the representation of start-up and high-growth
technology companies in matters of corporate finance and securities,
venture capital, mergers and acquisitions, and corporate governance.