U.S. Reps. Zach Nunn (R-IA) and Janelle Bynum (D-OR) bipartisan legislation last week to simplify the process for businesses to go public through an initial public offering (IPO).
Currently, companies must submit three years of audited financial statements to the Securities and Exchange Commission (SEC) to go public. This is also the case if a company simply wants to spin off a part of their existing business.
Those startup or spinoff businesses are classified as emerging growth companies (EGCs) by the SEC, yet they face stricter reporting requirements than other IPOs. At present, these companies must provide an additional year of audited financial data. This is both expensive and time-consuming and often prevents smaller firms from accessing capital markets.
The proposed Encouraging Local Emerging Ventures and Economic Growth Act (ELEVATE) Act seeks to align the financial disclosure requirements for all EGCs. Specifically, it allows qualifying companies to submit just two years of audited financials instead of three, whether launching an IPO or spinning off part of a parent company.
“When investment capital gets trapped on the coasts by large firms and D.C. regulators, it’s Iowa’s small businesses that suffer,” Nunn said. “The ELEVATE Act is a commonsense fix that would level the playing field for Iowa businesses who look to outside investment to grow their business. It’s time we let Main Street play by the same rules as Wall Street.”
The legislation unanimously passed in the House Financial Services Committee in the 118th Congress.
“Oregon’s small businesses deserve a fair shot to start up, grow, and compete,” Bynum said. “The ELEVATE Act will cut through the red tape, making it easier for local entrepreneurs to get off the ground and into the marketplace. I’m proud to introduce a bill that ensures our policies work for the people who are building Oregon’s – and America’s – economy by supporting innovation, growth, and greater access to capital for small businesses.”