April 9, 2012
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Going Public Just Got Easier
The Jumpstart Our Business Startups Act (the “JOBS Act”) passed by Congress and signed into law by the President on April 5, 2012, relaxes regulations on initial public offerings (“IPOs”) and on reporting and governance for many newly public companies by creating an “IPO on-ramp” for a new class of “Emerging Growth Companies.” Other Lathrop Gage Alerts discuss JOBS Act provisions relating to private offerings and private companies.
Emerging Growth Companies
The JOBS Act relaxes regulations on any Emerging Growth Company, defined as a public company:
Reduced Restrictions on the IPO Process
Under the JOBS Act, an Emerging Growth Company undergoing an IPO is now permitted:
In addition, the JOBS Act permits a broker-dealer to publish or distribute a research report about an Emerging Growth Company with a registered offering that is proposed, in process, or effective, without the research report being deemed an “offer” of securities, even if the broker-dealer participates in the offering. The JOBS Act also removes certain restrictions on communications between securities analysts and potential investors in connection with IPOs of Emerging Growth Companies, although anti-fraud rules still apply.
Temporary Relief from Post-IPO Regulations
During the “grace period” of up to five years after its IPO, an Emerging Growth Company is now exempt from several requirements relating to financial accounting and executive compensation disclosures that otherwise apply to public companies, such as the requirements:
An Emerging Growth Company may choose to ignore any or all of the exemptions from regulatory requirements that the JOBS Act makes available to it, and instead to comply with the regulatory requirements applicable to public companies that are not Emerging Growth Companies – with the exception of the all-or-nothing exemption from compliance with new or revised financial accounting standards.
These provisions of the JOBS Act are self-effectuating, so they are effective immediately without requiring SEC regulations to implement them. To discuss this alert or any securities law matter, please contact your Lathrop Gage attorney or any of the attorneys listed on this alert.
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