"Corporate Finance Alert: ‘Jumpstart Our Business Startups Act’ Signed Into Law"

On April 5, 2012, President Obama signed into law the “Jumpstart Our Business Startups Act” (the JOBS Act), which previously was approved overwhelmingly by Congress. The JOBS Act consists of a package of bills intended to make it easier for smaller companies to raise public and private capital in the U.S. financial markets. Among the most significant provisions in the JOBS Act is the creation of a new category of issuers called “emerging growth companies” that would be exempt from, or subjected to reduced, regulatory requirements for a limited period of time in an effort to encourage them to go public in the United States. The JOBS Act also includes other measures intended to ease significantly private capital formation and reduce public reporting requirements for small and emerging businesses. The versions of the JOBS Act initially approved by each of the House of Representatives and Senate were nearly identical, other than with respect to certain crowdfunding provisions. The House of Representatives subsequently approved the Senate version of the JOBS Act. A summary of the JOBS Act follows.

Title I – Reopening American Capital Markets to Emerging Growth Companies

Title I of the JOBS Act, the so-called “IPO On-Ramp” provisions, establishes a new category of issuers called “emerging growth companies” (EGCs) under the U.S. securities laws. An EGC is defined as an issuer that had total annual gross revenues of less than $1 billion during its most recently completed fiscal year. An issuer that is an EGC would continue to be considered an EGC until the earliest of...