The Jumpstart Our Business Startups Act (JOBS Act) is now in effect. Intended to spur job creation and economic growth by improving access to the capital markets for startup and emerging companies, the JOBS Act, signed into law earlier today, effects profound changes to the US securities laws and has broad implications for pre-IPO companies, companies that recently went public, and the conduct of IPOs and other securities offerings. Although some aspects of the JOBS Act (such as the "crowdfunding" provisions) are subject to future SEC rulemaking, the provisions applicable to IPOs are immediately in effect.
The cornerstone of the JOBS Act is the creation of an "IPO on-ramp," which provides emerging growth companies (EGCs) with a phase-in period to fully comply with various disclosure and accounting requirements. An EGC has up to the last day of the fiscal year following the fifth anniversary of its IPO to come into full compliance with various disclosure regulations and accounting and auditing standards that are otherwise applicable to all US public companies. The act also permits EGCs to submit a draft Form S-1 to the SEC for confidential review instead of filing it publicly on the SEC's EDGAR system, and allows EGCs to engage in oral or written "test-the-waters" communications with eligible institutions to determine their investment interest in a contemplated IPO, either prior to or following the date of filing of the Form S-1. Many of the act's benefits begin to apply during the IPO process, while others become applicable only following an IPO.