A new law recently signed by President Obama—known as the
FAST Act and related mostly to transportation and
infrastructure—will help streamline IPOs by emerging growth
companies (EGCs). These are companies with annual revenue of less
than US$1 billion, and they have conducted the overwhelming
majority of U.S. IPOs in the past three years. The FAST Act will
also simplify U.S. companies' disclosure documents and
facilitate secondary market trading in privately-placed
IPOs by Emerging Growth Companies
EGCs are permitted to file their IPO registration statements
with the SEC confidentially. During the SEC review process, an EGC
chooses when to make its IPO public, but must wait at least 21 days
after doing so before beginning its road shows. This waiting period
is being shortened to 15 days, providing more flexibility,
especially in volatile markets, for EGCs to launch their IPOs based
on market conditions.
The burden of preparing financial statements will be reduced for
some EGCs going public. The general rule is that two years' of
audited financial statements must be included in an SEC
registration statement filed by an EGC. For example, if an EGC with
an IPO planned for 2016 files its initial registration statement
for SEC review before its 2015 financial statements are ready, it
would have to include its 2013 and 2014 statements, even if its
2015 statements will be ready in time for the IPO launch. This rule
is being changed so that only the 2014 financial statements would
have to be included in the initial SEC filing if the company
reasonably believes that its 2015 financial statements will be
added in time for the IPO launch. The impact will be a welcome
reduction of time and expense for some EGCs, although cross-border
Canada-U.S. IPOs will not be affected because Canadian rules
require three years of financial statements.
Simplifying Disclosure Documents
To make their lengthy, detailed annual reports on Form 10-K more
user-friendly, U.S. companies will be able to create a summary page
that includes cross-references or links to the full contents of the
report. In the same spirit of modernization, and to help reduce the
burden of preparing long and complex disclosure documents, the SEC
has been tasked with amending its disclosure rules over the next
two years to remove redundant, outdated or unnecessary
Private Resales of Securities
To enhance the secondary trading market for privately placed
securities, an informal exemption from SEC registration—the
so-called 4(1½) exemption—has been codified. This
clarification of the rules governing resales of restricted
securities should facilitate more robust trading among accredited
investors, particularly in securities of private companies.
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should be
sought about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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