Business Litigation Alert - "The JOBS Act Passes Congress: Changes Coming Soon to a Business Near You"
President Obama is expected to sign the JOBS Act (Jumpstart Our Business Startups) into law, possibly as early as this week. This much talked about legislation is principally designed to make it easier for small businesses to raise money, with the hope that additional capital will lead to the hiring of more workers, thereby improving the economy.
Some of the most notable provisions of the bill include:
- Allowing new forms of equity financing to be available to small business, including “crowd-funding” (i.e., small stock sales to many individuals). Under the JOBS Act, companies can solicit equity investments of up to $1 million annually through the Internet or elsewhere without having to register the shares with the S.E.C.
- Relieving a new category of firms called “emerging growth companies” from certain regulatory and disclosure requirements in their initial IPO registration statements, and for five years after that, including the need for an outside auditor to confirm financial controls; commonly referred to as the “IPO On-Ramp.”
- Lifting the current ban on "general solicitation" and advertising in specific kinds of private placements of securities.
Only time will tell if this legislation actually benefits small businesses and boosts the economy.
In the meantime, businesses and investors hoping to take advantage of these new provisions need to make sure they understand the specific requirements and legal ramifications of raising or investing money under the JOBS Act. That’s right, even with less regulation, you’ll still need legal advice to ensure compliance with the changes coming soon.