recent annual period completed, regardless of whether financial statements for the period are presented in the registration statement. In this example, the most recent annual period completed would be 2012.7
Applicability of the December 9 2011 effective date An issuer can qualify as an EGC if it first sold its common stock in a registered offering on or after December 9 2011. The SEC has indicated that this eligibility determination is not limited to initial public offerings that took place on or before December 8 2011, in that it could also include an offering of common equity securities under an employee benefit plan on Form S-8, as well as a selling shareholder’s registered secondary offering.8
The SEC notes that just
having a registration statement go effective on or before December 8 2011 is not a bar to EGC status, as long as no common equity securities were actually sold off of the registration statement on or before December 8 2011.9
Qualification for EGC status The SEC has indicated that asset-backed issuers and registered investment companies do not qualify as EGCs; however, business development companies could qualify.10 The SEC may determine, through the course of its review process or otherwise, that other particular types of issuers are not EGCs for the purposes of Title I of the JOBS Act. Previously public issuers An issuer that succeeds to a predecessor’s Exchange Act registration or reporting obligations under Rules 12g-3 and 15d-5 will not qualify for EGC status if the predecessor’s first sale of common equity securities occurred on or before December 8 2011, as the predecessor was not eligible for that EGC status.11 The SEC has addressed the EGC status of an issuer
that was once an Exchange Act reporting company but is not required to file Exchange Act reports.12
The SEC
notes that such an issuer can take advantage of the benefits of EGC status, even though its initial public offering of common equity securities occurred on or before December 8 2011. In this regard, the SEC indicates that if an issuer would otherwise qualify as an EGC but for the fact that its initial public offering of common equity securities occurred on or before December 8 2011, and such issuer was once an Exchange Act reporting company but is not required to file Exchange Act reports, then the SEC would not object if such issuer 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 in Sections 2(a)(19)(A)-(D) of the Securities Act. This position is not available to an issuer that has had the
16 JOBS Act Quick Start
registration of a class of its securities revoked pursuant to Exchange Act section 12(j). The SEC goes on to note that, based on the particular facts and circumstances, the EGC status of an issuer may be questioned if it appears that the issuer ceased to be a reporting company for the purpose of conducting a registered offering as an EGC. The SEC recommends that issuers with questions relating to these issues should contact the Division of Corporation Finance’s Office of the Chief Counsel. This interpretation seeks to address EGC status for those companies that were taken private through private equity or management buyouts with the expectation of a liquidity event or exit through an IPO in the future, which have made up a relatively significant portion of the IPO market in recent years.
Losing EGC status Status as an EGC is maintained until the earliest of: • the last day of the fiscal year in which the issuer’s total annual gross revenues are $1 billion or more;
• the last day of the issuer’s fiscal year following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under the Securities Act (for an debt-only issuer that never sold its common equity pursuant to an Exchange Act registration statement, this five-year period will not run);
• any date on which the issuer has, during the prior three- year period, issued more than $1 billion in non-convertible debt; or
• the date on which the issuer becomes a “Large Accelerated Filer,” as defined in the SEC’s rules.13
EGC status cannot be regained With regard to the $1 billion debt issuance test, the SEC
has indicated that the three-year period covers any rolling three-year period, which is not in any way limited to completed calendar or fiscal years.14
The SEC also noted
that it reads “non-convertible debt” to mean any non- convertible security that constitutes indebtedness (whether issued in a registered offering or not), thereby excluding bank debt or credit facilities.15
The debt test references debt
issued, as opposed to issued and outstanding, so that any debt issued to refinance existing indebtedness over the course of the three-year period could be counted multiple times. The SEC has indicated, however, that the staff will not object if an issuer does not double count the principal amount from a private placement and the principal amount from the related Exxon Capital or A/B exchange offer.16
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