Congress has approved bipartisan legislation designed to remove regulatory barriers for companies going public and seeking to attract investors. The SEMA-supported “Jumpstart Our Business Startups” (JOBS) Act makes it easier for small companies to comply with Securities and Exchange Commission (SEC) rules when securing outside capital investment. Companies will be able to file initial public offerings (IPO) more quickly as regulations will be phased-in over a period of five years.
The legislation raises the threshold number of shareholders triggering SEC registration from 500 to 2,000 and increases the offering threshold from $5 million to $50 million in shares. Companies can raise capital using the Internet and social media so long as the website is registered with the SEC and investors are informed about a company’s financial condition and shareholder risks. Individual investments are limited to 5% of annual income for those earning less than $100,000 a year, and 10% above that amount. Companies with gross annual revenues of up to $1 billion can sell shares to the public while being exempted from some of the requirements of the Sarbanes-Oxley Act. President Obama supports the legislation and intends to sign it into law.
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