On Thursday March 22, 2012, by a vote of 73-26, the U.S. Senate passed a measure designed to assist small businesses raise capital. The JOBS (Jumpstart Our Business Startups) Act is a compilation of six legislative proposals aimed at addressing how small start-ups raise capital and revising certain disclosure requirements.
The JOBS Act contains provisions that would allow small businesses to raise capital in a number of different ways. One such way is removing restrictions imposed by the Securities and Exchange Commission (SEC) on crowdfunding. Under the JOBS Act, entrepreneurs can raise up to $1 million from investors before having to register with the SEC. It also allows small businesses to use advertisements to solicit investors. This was previously disallowed by the SEC beginning in 1982.
The JOBS Act also changes the way small business go public by establishing the “emerging growth companies” designation. These companies, making less than $1 billion in revenue, would be exempt from certain regulations established under the Dodd-Frank Wall Street Reform and Consumer Protection Act and would have fewer reporting requirements when filing an Initial Public Offering (IPO). Provisions in this act would raise the limit of Regulation A offerings from $5 million to $50 million. Companies raising capital using this regulation would be exempt from issuing periodic reports that are expected of larger publicly held corporations.
The bill will now be put to a vote in the House of Representatives before going to the President for signature.