In April 2012, President Obama signed the JOBS Act into law. The new law is designed to make it easier for small and growing businesses – specifically, those on track to conduct an initial public offering (IPO) – to attract investors and access capital while complying with U.S. securities laws. The new law changes existing securities laws in a number of ways. Specifically, it:
- Encourages initial public offerings (IPOs) by organizations defined as “emerging growth companies” (EGCs).
- Facilitates the ability of companies to raise capital in private and small public offerings without registering with the U.S. Securities and Exchange Commission (SEC), thereby reducing the costs and red tape associated with raising capital.
EGC is a status of eligibility laid out in the JOBS Act; to achieve this status, companies must post annual gross revenue of less than $1 billion in their most recent completed fiscal year.
Given its scope, the JOBS Act can have significant implications for organizations considering an IPO. In addition, given the fact that the JOBS Act directs the SEC to enact several new rules (some of which are still being finalized), executives involved in public company readiness (PCR) efforts, as well as their external advisors, should monitor the SEC’s progress. The guidance in these FAQs is intended to focus squarely on the elements of the JOBS Act that affect PCR efforts while serving as a supplement to Protiviti’s Guide to Public Company Readiness: Frequently Asked Questions.