Cutting the small business red tape
The Jumpstart Our Business Startups (JOBS) Act is designed to increase "American job creation and economic growth by improving access to the public markets for emerging growth companies." (112th Congress; 2nd session, 2012)
The JOBS Act has a number of provisions that are aimed at cutting red tape to ease the burden of small and emerging businesses. One of the key revisions contained in this Act is the establishment of an "emerging growth company" status for small businesses that have less than $1 billion in revenue. This status would ease the process of going public by exempting companies from certain financial disclosure and governance requirements over a five-year period.
In addition to the emerging growth company status, the Act also incorporates the practice of "crowd funding," which provides access to smaller investors through the use of internet solicitation. This crowd funding provision allows small businesses to raise up to $1 million ($2 million with audited financial statements provided) in any year from investors without adding to the record holder count if certain conditions are met. The investor can invest the lesser of $10,000 or 10 percent of investor's annual income.
Further, the Act increased the limit from $5 million to $50 million for exempt offerings of all securities offered and sold within the prior 12 months before registration with the SEC is required.
Currently, companies are required to register with the SEC when they have over 500 shareholders in any one class. The JOBS Act will increase this limit to 2,000 shareholders (or 500 non-accredited investors). However, the Act did not revise the threshold of 300 record holders to terminate registration for non-bank or bank holding companies which continues to be a significant issue for renewable energy companies with SEC reporting requirements.
RSM and its legal partners continue to review options for renewable and alternative energy companies for de-registration as an option to ensure the ability to maintain profitability in turbulent markets, along with controlling overhead expenses.
For those companies already subject to filing, the JOBS Act has not eased the path to de-registration. However, it does ease the ability for second generation bio-fuels and alternative electron sources such as bio-mass, wind and solar companies to acquire capital and fulfill filing requirements for new and emerging small businesses.