House Passes Bill Simplifying IPO Process and Private Capital Formation
March 19, 2012
BY ROBERT A. CLAASSEN, JEFFREY T. HARTLIN & MICHAEL L. ZUPPONE
On March 8, 2012, the U.S. House of Representatives passed the Jumpstart Our Business Startups Act, or JOBS Act. The JOBS Act, which combines several bills that were introduced in the House last year, aims to reduce the costs of going public for private companies and facilitate increased capital formation.
The JOBS Act must still be approved by the Senate and the White House, but both have expressed support for the reforms generally and indicated they will act quickly. Comparable legislation has been introduced in the Senate and has been the subject of various hearings, and discussions with contacts on Capitol Hill suggest it is moving forward in the Senate. A number of industry groups and organizations have voiced both support and concerns as the JOBS Act makes its way to the Senate. While the North American Securities Administrators Association opposes the relaxed regulations in the JOBS Act, both the National Venture Capital Association as well as several hundred entrepreneurs have urged legislators to approve the bill.
The JOBS Act may undergo changes before becoming law, but as currently passed by the House it encompasses reforms in two general areas: (1) making the IPO process less burdensome for smaller companies with the benefit of an on ramp regulatory regime characterized by reduced regulation, and (2) easing regulatory restrictions on private capital formation that has been substantially curtailed under an existing regulatory regime that is outmoded and does not reflect current communications technology and recent innovation in social media.