Going Public & JOBS Act: Reduced SEC Disclosure Requirements for EGC’s

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Going Public & JOBS Act: Reduced SEC Disclosure

Going Public & JOBS Act Reduced Disclosure One:

Emerging Growth Companies are treated like Smaller Reporting Companies [companies with a market value of outstanding voting and nonvoting common equity held by non-affiliates of less than $75 million or less than $50 million in annual revenues] with respect to financial statement disclosure:

  • need not present more than 2 years of audited financial statements in order for the registration statement of such emerging growth company with respect to an initial public offering of its common equity securities to be effective.
  • in any other registration statement to be filed with the Commission, an emerging growth company need not present selected financial data in accordance Rule 301 Regulation S-K, for any period prior to the earliest audited period presented in connection with its initial public offering;
  • may not be required to comply with any new or revised financial accounting standard until such date that a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) is required to comply with such new or revised accounting standard, if such standard applies to companies that are not issuers.

Going Public & JOBS Act Reduced Disclosure Two:

EGC’s need only comply with Rule 402 of Regulation S-K concerning Executive Compensation to the extent required of smaller reporting companies.  This means that Emerging Growth Companies will not be required to present a detailed Compensation Discussion and Analysis and multiple tables reporting compensation of the CEO, CFO and at least three other executive officers, and will be required to disclose in SEC filings only:

  • compensation of three (rather than five) executive officers, consisting of the CEO and two other most highly compensated executive officers (i.e., not automatically the CFO);
  • the Summary Compensation Table and related narrative disclosure, reporting full compensation for up to the last two (rather than three) completed fiscal years;
  • the Outstanding Equity Awards at Fiscal Year-End table;
  • the Director Compensation table; and
  • additional narrative disclosure (e.g., material terms of retirement plans, termination payments and change in control arrangements).

Going Public & JOBS Act Reduced Disclosure Three:

The Act also provides or will provide when rules become effective, exemptions from the following provisions of the Dodd-Frank Act:

  •  Shareholder Votes on Compensation.
  • Pay for Performance
  • Internal Pay Equity.

Going Public & JOBS Act Reduced Disclosure Four:

The Act eliminates what many believed to be one of the most burdensome and least cost effective provisions of Sarbanes-Oxley by reliving Emerging Growth Companies of the burden of having its auditor have to do a separate, expensive audit of its internal controls over financial reporting

Going Public & JOBS Act Reduced Disclosure Five:

The Act provides an exemption from the audit firm rotation requirements or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer (auditor discussion and analysis) of Sarbanes-Oxley.

Please schedule a no obligation consultation by clicking the button on the site if you’d like more information on Going Public & Jobs Act Reduced Disclosure or any other aspect of Going Public.

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