New JOBS Act FAQs

News Brief

Corp Fin has just posted several new JOBS Act FAQs, primarily related to M&A transactions and financial information. Be sure to check out the last bullet, which has a surprising (I think) result.

  • An EGC may use Securities Act Section 5(d) test-the-waters communications with QIBs and institutional accredited investors in connection with an exchange offer or merger. The EGC must, however, make any required filings under the Exchange Act, such as under Rules 13e-4(c), 14a-12(b), and 14d-2(b) for pre-commencement tender offer communications and proxy soliciting materials in connection with a business combination, for any written communications relating to the exchange offer or merger. The JOBS Act did not amend the regulatory requirements under the Exchange Act related to exchange offers or mergers.
  • An EGC may use the confidential submission process in Section 6(e) to submit a draft registration statement for an exchange offer or merger that constitutes its IPO of common equity securities. 
    • If the EGC does not commence its exchange offer before the effectiveness of the registration statement, it must publicly file the registration statement (including the initial confidential submission and all amendments) at least 21 days before the earlier of the road show, if any, or the anticipated date of effectiveness of the registration statement. This position applies to all exchange offers that do not use early commencement, including those that do not qualify for early commencement under the provisions of Rule 13e-4(e)(2) and Rule 14d-4(b) regarding going-private transactions and roll-up transactions.
    • If the EGC commences its exchange offer before effectiveness of the registration statement pursuant to Rule 162, it must publicly file the registration statement (including the initial confidential submission and all amendments) at least 21 days before the earlier of the road show, if any, or the anticipated date of effectiveness of the registration statement, but, in light of the filing requirement under Rules 13e-4(e)(2) and 14d-4(b), no later than the date of commencement of the exchange offer. Similarly, for the early commencement of exchange offers subject only to Regulation 14E, the registration statement would need to be filed at least 21 days before the earlier of the road show, if any, or the anticipated date of effectiveness of the registration statement, but no later than the date of commencement of the exchange offer.
    • An EGC must also make the required filings under Rule 425 (unless it is relying on 5(d) for test-the-waters communications) and Rules 13e-4(c) and 14d-2(b) for pre-commencement tender offer communications. An EGC must also file the tender offer statement on Schedule TO on the date of commencement of the exchange offer under Rules 13e-4(b) and 14d-3(a), as applicable. 
    • In a merger where the target company is subject to Regulation 14A or 14C and the registration statement of the EGC acquiror includes a prospectus that also serves as the target company's proxy or information statement, the acquiror must publicly file the registration statement (including the initial confidential submission and all amendments) at least 21 days before the earlier of the road show, if any, or the anticipated date of effectiveness of the registration statement. Also, the acquiror must make the required filings under Rule 425 (unless it is relying on Section 5(d) for test-the-waters communications) and Rule 14a-12(b) for any soliciting material, as applicable.
  • If an EGC (not a shell company) is acquiring a target company that does not qualify as a smaller reporting company and the EGC will present only two years of financial statements in its registration statement for the exchange offer or merger, Corp fin would not object if the EGC presents only two years of financials for the target.
  • If an EGC (not a shell company) that included only two years of financial statements in its IPO registration statement and has not yet filed three years of financial statements in a Form 10-K is now required to a Form 8-K presenting the financial statements of a significant business acquired in a forward acquisition, Corp Fin would not object if the EGC presented only two years of financial statements for the acquired business in the Form 8-K. 
  • This table shows how EGCs A and C, in the two fact patterns below, should evaluate whether, post-transaction, they trigger any of the disqualifications from the definition of EGC in Sections 2(a)(19)(A), (B), (C) or (D) of the Securities Act. 
  • Example 1: Company A acquires Company B for cash or stock, in a forward acquisition. Company A is both the legal acquiror and the accounting acquiror.
  • Example 2: Company C undertakes a reverse merger with Company D, an operating company. Company D is presented as the predecessor in the post-transaction financial statements.
  • (In each example, the companies' fiscal year is the calendar year; the transactions occur on September 30, 2012; and FAQ #24, on succession, is not implicated.)
  • If an EGC is required to register under Section 12(g) of the Exchange Act because it has more than $10 million in assets and 2,000 or more holders of record but has not yet conducted an IPO, unless it is a smaller reporting company, it must include three years of financial statements in its registration statement on Form 10 or Form 20-F. Section 7(a)(2)(A) of the Securities Act, which permits two years of financial statements, applies only to the registration statement for an IPO of common equity securities.
  • Similarly, an EGC may not rely on Section 7(a)(2)(A) to provide only two years of audited financial statements in the registration statement for an offering of debt securities that is the company's IPO. Section 7(a)(2)(A) is limited to the registration statement for an IPO of common equity securities. However, if the EGC conducts a registered offering of debt securities after its IPO of common equity, Corp Fin would not object if the EGC does not present audited financial statements for any period prior to the earliest audited period presented in connection with its IPO of common equity. See FAQ #12.
  • If a company lost its EGC status, Corp fin would not object if the company did not present, in subsequently filed registration statements and periodic reports, selected financial data or a ratio of earnings to fixed charges for periods prior to the earliest audited period presented in its initial Securities Act or Exchange Act registration statement.
  • For purposes of determining whether a company qualifies as an EGC, the revenue test should be applied to the most recent annual period completed, regardless of whether financial statements for that period are presented in the registration statement. For example, if a calendar-year company filed in January 2013 and did not include in its registration statement financials for fiscal 2012, it would still apply the EGC revenue test to 2012.
  • A confidential submission of a draft registration statement is not required to be signed or to include consents. Even when these submissions are required to be "publicly filed" with the SEC before the road show, these previous confidential submissions are not required to be signed or to include consents.
  • The analysis to determine whether an issuer is an EGC focuses on whether the issuer, and not its parent, meets the EGC requirements. Therefore, whether there is a spin-off of a sub, a registered IPO of sub common stock or a transfer of a business into a newly-formed sub for purposes of an IPO of that sub's common stock, if the sub would qualify as an EGC, the fact that the parent does not qualify as an EGC is not relevant. However, the sub's EGC status may be questioned, based on the particular facts and circumstances, if it appears that the issuer or its parent is engaging in a transaction for the purpose of converting a non-EGC into an EGC, or for the purpose of obtaining the benefits of EGC status indirectly when it is not entitled to do so directly. Issuers with questions should contact the Corp Fin's Office of the Chief Counsel.
  • A company that was once an Exchange Act reporting company but is not currently required to report is now planning to conduct a public offering of its common equity. If that company would otherwise qualify as an EGC but for the fact that its IPO of equity occurred on or before December 8, 2011, Corp Fin would not object if the company takes advantage of all of the benefits of EGC status for its next registered offering and thereafter, until it triggers one of the disqualification provisions. This position is not available if the company has had the registration of a class of its securities revoked pursuant to Exchange Act Section 12(j). In addition, if it appears, based on the particular facts and circumstances, that the company ceased to be a reporting company for the purpose of conducting a registered offering as an EGC, the company's EGC status may be questioned. Companies with questions should contact Corp Fin's Office of the Chief Counsel.
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