SEC Amends Smaller Reporting Company Definition

Last month, the Securities & Exchange Commission (SEC) adopted amendments to its definition of a “Smaller Reporting Company” which increases the number of companies that are allowed to provide reduced disclosures to comply with their SEC Reporting Requirements. The effective date of the amendments is September 10, 2018. As a result of the amendments, the definition of a Smaller Reporting Company for purposes of compliance with SEC Reporting Requirements has been expanded as discussed below.

Public Float Test – Initial Quotation

A public company with less than $250 million in their public float now qualifies as Smaller Reporting Company as compared to the $75 million threshold under the prior definition.

Revenue Test – Initial Quotation

A public company with less than $100 million in annual revenues now qualifies as Smaller Reporting Company, if the company also has either no public float; or a public float of less than $700 million. The revenue test in the prior definition of a smaller reporting companies required the issuer to have less than $50 million of annual revenues and no public float.

Smaller Reporting Company Threshold Requirements

If an issuer is unable to qualify under the new Smaller Reporting Company definition, it may qualify when it meets the lower qualification thresholds in the amendments which are 80% of the initial qualification thresholds.

Public Float Threshold Requirements

Companies with less than $200 million of public float can provide scaled down Smaller Reporting Company disclosures, as compared to the $75 million threshold under the prior definition.

Threshold Revenue Test

Companies with less than $80 million in annual revenues can provide scaled Smaller Reporting Company disclosures, if it previously had $100 million or more of annual revenues; and less than $560 million of public float, if it previously had $700 million or more of public float.

The revenue test in the prior definition of a Smaller Reporting Company applied to companies with less than $40 million of annual revenues and no public float.

The SEC estimates that 966 additional companies will be eligible for Smaller Reporting Company status in the first year under the amendments. The amendments will reduce the time and cost of compliance with SEC Reporting Requirements particularly for smaller issuers.

For more information about SEC Reporting Requirements going public, securities law or our other services please contact a Securities Attorney at Hamilton & Associates Law Group, P.A. 01 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956 or by email at [email protected].   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

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