What Is a Smaller Reporting Company? Going Public Lawyer

Securities Lawyer 101 Blog

The Securities and Exchange Commission (the “SEC”) adopted a system of disclosure rules for issuers who fall into the category of a smaller reporting company.   This is often a big advantage for companies going public because enables them to take advantage of reduced disclosure requirements. The “smaller reporting company” category includes generally, companies that enter the SEC reporting system with less than $75 million in common equity public float.  Companies that are unable to calculate their public float typically qualify if they have less than $50 million in annual revenues upon entering the system. Companies should determine eligibility for smaller reporting company status based on the last business day of their most recent second fiscal quarter.

To qualify as a smaller reporting company, the issuer must:

• not be an investment company or asset-backed issuer; and
• have a non-affiliate public float of less than $75 million; or
• have annual revenues of less than $50 million (if no public float).

The method of calculating the public float differs depending on whether the company seeking smaller reporting company status is a reporting or non-reporting company. Reporting companies will follow the same date guidelines set forth in Rule 12b-2 of the Exchange Act for accelerated filers (last day of second fiscal quarter), while non-reporting companies will calculate their public float based on their choice of a date within 30 days of the filing date of their initial registration statement.

Non-reporting companies that do not have a public float, or whose common equity is not priced by the market, may rely on a revenue test to qualify as smaller reporting companies. Such non-reporting companies must have annual revenues of less than $50 million during the last fiscal year before filing the registration statement to be eligible for smaller reporting company status.

The definition of smaller reporting company, however, contains no limitation on the citizenship of eligible companies, making this designation available to foreign companies. This represents a departure from the definition of small business issuer which only applied to U.S. and Canadian companies.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton Florida, (561) 416-8956, by email at info@securitieslawyer101.com.   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.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com