I’m attorney Laura Anthony founding partner of Legal & Compliance, a full service corporate,
securities, and business transactions law firm.
Today is the continuation in a LawCast series talking about the recent change to allow confidential
filings of registration statements by all companies.
Title One of the JOBS Act, initially enacted on April 5, 2012, created a new category of
issuer called an emerging growth company, or EGC.
The primary benefits of an EGC include scaled-down disclosure requirements for both in an IPO
process and ongoing reporting requirements, confidential filings of registration statements,
certain test-the-water rights in IPO’s, and an ease on analyst communications and
reports during the EGC’s IPO process.
Although EGC disclosures and rights are similar to smaller reporting companies, they are not
exactly the same.
As a reminder, the definition of an EGC when it was first enacted on April 5, 2012, was
a company with total annual gross revenues of less than $1 billion during its most recently
completed fiscal year that first sells equity in a registered offering after December 8,
2011.
It could not have gone public before December 8, 2011.
An EGC loses its EGC status on the earlier of the last day of the fiscal year in which
it exceeds $1 billion in revenues; the last day of the fiscal year following the fifth
year after its IPO, so, for example, if the issuer has a December 31 fiscal year-end and
goes public in an IPO on May 2nd, 2016 that it will cease to be an EGC on December 31,
2021); third, the date on which it has issued more than $1 billion in non-convertible debt
during the prior three-year period; or, lastly, the date it becomes a large accelerated filer,
i.e., its non-affiliated public float is valued at $700 million or more.
EGC status is not available to asset-backed securities issuers, or AVS reporting under
the Regulation AB.
It is also not available to business development companies or BBCs.
On March 31, 2017, the SEC made inflationary adjustments to the definition of an EGC by
increasing the definition by $70 million.
Accordingly, an EGC is now defined as a company with total gross revenues of less than $1
billion-70 million, and each of the factors that could cause it to lose at EGC status
have likewise been changed upward to $1 billion , 70 million.
Regulation A+ as enacted on June 19, 2015, also allows for confidential submissions of
an offering circular by companies completing their first Regulation A+ offering.
Confidential submissions under Regulation A allow a company to get the process under
way while soliciting interest of investors using test-the-waters provisions without the
negative publicity risk if it alters or withdraws the offering before qualification by the SEC.
However, the confidential filing and all SEC comments, and all amendments must be publicly
filed as exhibits to the offering statement at least 15 calendar days before qualification
by the SEC.
I’m securities attorney Laura Anthony, founding partner of Legal & Compliance, and producer
of LawCast.
Should you have any questions about today’s topic, please visit SecuritiesLawBlog.com
and LawCast.com, or contact me directly.
Inquiries of a technical nature are always encouraged.