Not just a statement of the new JOBS Act, an experienced securites lawyer breaks the law down into manageable pieces for companies to help enable companies decide whether and how to be an "Emerging Growth Company".

1. Emerging Growth Companies
Decision Tree
Society of Corporate Secretaries and Governance
Professionals
National Conference, Washington D.C.
July 12, 2012
Steven H. Shapiro, Pircher, Nichols & Meeks
sshapiro@pircher.com
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2. Background of Steven H. Shapiro
• Expertise in securities law, corporate law and mergers
and acquisitions
• In-House
– General Counsel of:
• First Midwest Bancorp
• eLoyalty Corporation
• Cole Taylor Bank
– Deputy General Counsel - FMC / FMC Technologies
• Private practice
– Pircher, Nichols & Meeks (currently)
– Before being in-house, 12 years of private practice in
Chicago
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3. Emerging Growth Companies Decision Tree
• Making sense of the JOBS Act
– Need more than a restatement of the law
• 5 Questions:
– Determine whether a company is an
“emerging growth company”
– And how that company would be affected by
JOBS Act
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4. Question 1: Does the Company Qualify as an
Emerging Growth Company (“EGC”)?
• Yes if:
• The company has total annual gross revenues of
less than $1 billion during most recently
completed fiscal year; and
• The company has not had a registered sale of
common equity securities of any kind (IPO,
secondary resale shelf, S-8) on or before
December 8, 2011.
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5. Question 2: Does the Company Want to Take
Advantage of a Confidential SEC Review of
Draft IPO Registration Statement?
• Why do it? Allows EGC to:
– Avoid early public disclosure of sensitive
business or financial information
– Withdraw or postpone IPOs without market
awareness (including the benefit of test the
waters communications)
• Why not do?
– None of these are issues
– Market or industry expectations
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6. Question 3: Does the Company Want to Take
Advantage of the “Testing the Waters”
Provision?
• Background:
• EGCs can now “test the waters” or gauge interest
communications with potential investors (QIBs and
“accredited investors”) to see if they have an interest in a
contemplated securities offering.
• Previously, these types of communications would have
been subject to current restrictions on pre-offering
communications.
– Would have been an illegal gun-jumping prior to filing
registration statement
– Written material could have been an illegal prospectus
• BUT liability under the securities laws (Section 12(a)
(2) liability and Rule 10b-5) still in effect
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7. Question 3: Does the Company Want to Take
Advantage of the “Testing the Waters”
Provision? (continued)
Additional Questions:
• When do this? At any time before or after filing
of a registration statement
• What kind of communications are used?
– Copy of the filed registration statement and/or road
show style presentations or flipbooks (not left behind)
have been used
– Written or oral communications allowed, with no SEC
filing obligations.
– Communications may include “price discovery” and
other discussions of valuation and potential demand
• Share the company’s projections? Probably not
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8. Question 3: Does the Company Want to Take
Advantage of the “Testing the Waters”
Provision? (continued)
• Can non-binding indications of interest be
solicited at a pre-launch meeting? Probably.
• Can research analysts participate? No.
• Can company use testing water in follow-on
offering after initial registration statement? Yes.
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9. Question 4: Does the Company Want to Take
Advantage of the Reduce IPO Disclosure
Requirements for EGCs?
Accounting Disclosure
• Two years of audited financial statements, not three
• Selected financial data and MD&A not required for
periods prior to audited periods shown
• Not have to comply with future PCAOB rules requiring
mandatory audit firm rotation or an auditor discussion
and analysis
• Not have to comply with any additional rules adopted by
the PCAOB after the enactment of the JOBS Act unless
SEC determines that application of those rules are
“necessary or appropriate in the public interest”
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10. Question 4: Does the Company Want to Take
Advantage of the Reduce IPO Disclosure
Requirements for EGCs? (continued)
Compensation disclosure
• No CD & A required
• Disclosure of compensation required for no more than 3
executives (vs. 5)
• 2 (vs. 3) years of compensation disclosure - Summary
Compensation Table and related narrative disclosure
• No shareholder votes for say-on-pay and say on golden
parachutes for at least 3 years following IPO
• No disclosure of certain executive compensation to be
required under Dodd-Frank, such as comparison of
executive compensation to performance and median
disclosure
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11. Question 4: Does the Company Want to Take
Advantage of the Reduce IPO Disclosure
Requirements for EGCs? (continued)
• No auditor attestation of internal control over financial
reporting under Section 404(b) of SOX
• Issuers must prepare well in advance for SOX 404(b)
becoming applicable
• Comment letters propose this and other disclosure
requirements not apply until first fiscal year after the
fiscal year in which EGC status expires
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12. Question 4: Does the Company Want to Take
Advantage of the Reduce IPO Disclosure
Requirements for EGCs? (continued)
• EGCs may voluntarily include more than required
• Overarching materiality standard must be considered
• Underwriter due diligence and internal review processes
may be relevant
• Disclosures as to EGC status and related risk factors
now generally included
• EGCs with already filed registration statements may
reduce disclosure to conform to new rules (many keep
3rd year of financials but not CD & A)
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13. Question 5: How Long Can the Company be a EGC?
• Opt out voluntarily
– At time of registration statement
– Time of first 34 Act filing
OR
• Until earliest of:
– Last day of fiscal year in which total annual gross revenues
exceed $1 billion; or
– Last day of fiscal year following 5th anniversary of IPO; or
– Date on which it has issued more than $1 billion in non-
convertible debt during the previous 3-year period (on a rolling
basis); or
– Date on which it is deemed to be a “large accelerated filer” (i.e.,
public float of $700 million and a public filer for at least 1 year).
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14. Questions?
Steven H. Shapiro
sshapiro@pircher.com
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