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JOBS Act: Raising Capital is About to Become Easier.

Posted by Abraham Xiong on March 24, 2012 at 8:40 AM

Great news for small businesses.  Raising capital is about to get a lot more easier as the new JOBS Act Bill is being consider into law.

Jumpstart Our Business Startups Act (JOBS Act) was passed this week by the Senate, which fundamentally alters the securities laws for small businesses. One of the major benefit of the Bill will remove restrictions on capital raising that many of the detractors of the Act believe are important for investor protection.

Another significant component of the JOBS Act permits "crowd funding," the ability to raise capital in small amounts from many people usually via the Internet to finance a start up.  

Other components of the Act:

  • Eliminates the ban on public solicitation of investors by companies seeking financing in a private offering;
  • Raises the offering ceiling for so called "Regulation A Offerings" from $5 million to $50 million;
  • Raises the threshold for required registration as a public company from 500 to 2,000 shareholders (1,500 of whom must be "accredited investors" under the Regulation D standard);
  • Raises the threshold for required registration as a public company for community banks from 500 to 2,000
  • Creates a new category of securities issuer called an "emerging growth company," defined as companies with annual gross revenues of less than $1 billion.; and
  • Provides for a "securities on-ramp" to phase in costly SEC reporting and compliance requirements such as internal controls audits, Say-On-Pay votes, etc over a five-year period for "emerging growth companies".

 Supporters believe that the Act will increase more small business activities and create more jobs. This is based on the fact that young companies accounted for all net job growth between 1980 and 2005 — and that 92 percent of job creation came after an IPO.

The JOBS Act was passed in the House by a wide, bipartisan margin (390 to 23) on March 8th, and by the Senate by a narrower, but bipartisan margin (73 to 26) today. Because the Senate adopted the House version with a slight amendment, the bill will be sent back to the House to be reconciled.

The President has hinted that he will not have any hesitation in signing this Bill into Law should it make it to his desk. 

Categories: Recent News, Small Business, Legislation

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1 Comment

Reply Abraham Xiong
12:05 PM on April 7, 2012 
It's official. President Obama signed the JOBS Act this week on Thursday. I'm excited to see how this will shape up for the crowd funding platforms and how this can help new start ups. Any government contractors out there in need of funds?

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