Clifford Chance
The JOBS Act: Removing Significant Regulatory Obstacles to Capital Formation in the United States
6 April 2012
The Jumpstart Our Business Startups Act (the JOBS Act) was signed into law by President Obama on April 5, 2012. The JOBS Act seeks to encourage more initial public offerings in the United States and to facilitate other forms of capital formation by reducing some of the burdens imposed on growth-stage companies under U.S. federal securities laws. Several provisions of the JOBS Act became effective immediately while others will not become effective until the U.S. Securities and Exchange Commission (SEC) adopts implementing rules.
We expect the JOBS Act to impact favorably companies seeking to access the U.S. capital markets. Specifically, the JOBS Act:
- significantly reforms the initial public offering process for, and eases regulatory burdens on, a newly defined category of issuers – "emerging growth companies" (including a delay of auditor attestation requirements);
- permits general solicitation in certain private offerings targeted at qualified institutional buyers and accredited investors;
- improves the ability of companies to raise capital in private and small public offerings outside the traditional SEC registration process; and
- increases the thresholds for the number of shareholders a private company can have before it is forced into the U.S. public reporting regime, allowing more companies to remain "private" longer.
While the SEC's rules to implement this statute have yet to be drafted, we expect that foreign companies that qualify as emerging growth companies should be able to benefit from this new regime.
