What is JOBS Act (Jumpstart Our Business Startups Act)? - Definition from WhatIs.com

Definition

JOBS Act (Jumpstart Our Business Startups Act)

Part of the Compliance glossary:

The JOBS Act (Jumpstart Our Business Startups Act) is legislation that eases regulatory restrictions for new businesses to make it easier for startups to get established. 

The intention of the Act is to encourage more business startups, foster their success, and as a result, create more jobs and stimulate the economy. As stated in the bill, which passed as H.R. 3606, the purpose is “to increase American job creation and economic growth by improving access to the public capital markets for emerging growth companies.”

The main provisions of the JOBS Act:

  • Businesses are not required to register their common stock with the SEC (Securities Exchange Commission) until they have 500 unaccredited shareholders or a total of 2,000 accredited and unaccredited shareholders. Previously, that requirement went into effect when a business had a total of 500 shareholders of record. A non-accredited investor is one that does not meet the SEC’s standard for accreditation: A net worth of $1 million and an annual income of $200,000, or $300,000 in combination with a spouse’s income. This provision allows a startup to collect smaller sums of money from a larger pool of investors.
  • Certain types of small initial public offerings (IPO) are no longer required to register with the SEC. Restrictions are loosened on government-registered Internet-based “funding portals.” This provision was created to enable crowdfunding. Conditions include a limit on the amount an investor can contribute, up to the lesser of either 10 percent of income or $10,000.
  • Emerging growth companies are not bound by some regulatory and disclosure requirements – in particular, some stipulations of Section 404 of the Sarbanes-Oxley Act -- in their initial public filing and for a period of five years after that, up from two. SOX Section 404 mandates that all publicly-traded companies must establish internal controls and procedures for financial reporting and must document, test and maintain those controls and procedures to ensure their effectiveness.
  • Small businesses are now allowed to advertise seeking investors.
  • Companies can raise $50 million in share sales, up from a $5 million limit, before being required to register with the SEC, to enable more fundraising under less complex regulation.
  • Community banks are permitted to have 2,000 shareholders, up from 500.

 

The JOBS Act was signed into effect by President Barack Obama on April 5, 2012.

This was last updated in June 2012
Contributor(s): Ivy Wigmore
Posted by: Margaret Rouse

Related Terms

Definitions

  • USA Patriot Act

    - The USA Patriot Act is a law enacted in 2001, granting controversial new and extended data-collection abilities to the Department of Justice in an effort to combat terrorism after the September 11 ... (SearchDataManagement.com)

  • contingency plan

    - In business continuity and risk management, a contingency plan is a process that prepares an organization to respond coherently to an unplanned event. (WhatIs.com)

  • compliance

    - Compliance is the act of being in alignment with guidelines, regulations and/or legislation. Organizations must ensure that they are in compliance with software licensing terms set by vendors, for ... (SearchDataManagement.com)

Glossaries

  • Compliance

    - Terms related to compliance, including regulatory definitions and words and phrases about governance and mitigating IT risk.

  • Internet applications

    - This WhatIs.com glossary contains terms related to Internet applications, including definitions about Software as a Service (SaaS) delivery models and words and phrases about web sites, e-commerce ...

Ask a Question About JOBS Act (Jumpstart Our Business Startups Act)Powered by ITKnowledgeExchange.com

Get answers from your peers on your most technical challenges

Tech TalkComment

Share
Comments

    Results

    Contribute to the conversation

    All fields are required. Comments will appear at the bottom of the article.