In one of the most sweeping changes to the securities offering environment in years, the Jumpstart Our Business Startups Act, commonly referred to as the JOBS Act, became law on April 5, 2012. The stated purpose of the JOBS Act is to spur job creation by smaller companies, in part by an almost unprecedented relaxation of the regulatory capital raising requirements on small companies. The Act was propelled by a wave of support among the venture capital and startup communities over the sometimes vigorous objections of, among others, the U.S. Securities and Exchange Commission (SEC).
Perhaps the most significant changes are that the JOBS Act: (1) immediately establishes a new category of issuer, emerging growth companies (EGCs), that are subject to a less burdensome registration and reporting regime; (2) establishes a new exemption for securities offerings under the Securities Act for crowdfunding; (3) instructs the SEC to amend Regulation D under the Securities Act to remove the prohibition on general solicitation and general advertising; (4) expands the maximum amount for Regulation A-type offerings to $50 million; and (5) increases the number of shareholders that will require registration under the Exchange Act.
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