Originally published in BankNews - May 2012.
The Jumpstart Our Business Startups Act was signed into law by President Obama on April 5, 2012. Th e JOBS Act contains a series of changes to the federal securities law landscape that will benefi t community banks and their holding companies, including provisions to assist them in obtaining easier and less expensive access to capital. Note that while these provisions became operative when the President signed the JOBS Act into law, most require implementing regulations by the Securities and Exchange Comission or adjustments to existing regulations to account for the changes.
Perhaps the most important provisions of the JOBS Act for many banks and bank holding companies are the changes to the threshold number of shareholders that triggers public company reporting obligations. Banks and bank holding companies were previously limited to 500 shareholders of record before being required to become a reporting company and, once a reporting company, were required to fall below 300 shareholders before “going dark” by deregistering. To avoid the increased costs and disclosure obligations of being a reporting company, many organizations have refrained from bringing in new investors for fear of crossing the 500 shareholder threshold. Th e JOBS Act has increased the registration threshold to 2,000 shareholders and set the threshold for deregistration at 1,200 shareholders. Th ese changes will allow banks and bank holding companies that were approaching the former 500 shareholder cap to breathe easier, knowing they have room to raise capital from new investors without having to comply with burdensome public company registration and disclosure requirements. Reporting companies with fewer than 1,200 shareholders will have the opportunity to deregister if they decide that the benefi ts of registration are outweighed by the ability to signifi cantly reduce compliance costs by going dark.
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