Senate and House Pass Rules Easing Companies' Ability to Raise Funds


In early November, the House passed H.R. 1965, which had been introduced in May. The bill, sponsored by Rep. James Himes (D-CT), would amend the 1934 Securities Act so that companies would not need to register their issuance of equity securities to be traded on an exchange unless they have at least $10 million in assets. Under current law, the threshold is $1 million for some issuers. In addition, the threshold for registration would begin with 2,000 shareholders if the issuer is a bank or bank holding company, and 500 if it is neither, according to the summary presented on

“This bill helps banks help growing businesses access the capital they need to expand and create jobs while maintaining important protections for investors,” Rep. Himes said in a statement.

The legislation is expected to have a negligible impact on the SEC's workload and spending, according to this analysis by the Congressional Budget Office.

In March, the Senate's companion bill to H.R. 1965, S. 556, was introduced and referred to the Committee on Banking, Housing and Urban Affairs. Its sponsor was Senator Kay Hutchinson (R-TX), GovTrack reports.

Also in early November, H.R. 1070, sponsored by David Schweikert (R-AZ), was introduced and passed the House. This bill, “The Small Company Capital Formation Act,” would amend the Securities Act 1933 so that most small companies would not need to register with the SEC until they sold at least $50 million in securities, subject to specified terms and conditions. The previous threshold of $5 million had been in place for 20 years, according to this article in The Hill.

“Small businesses are the backbone of job growth in our country. Taking a small business public is an important, but expensive process that requires millions in underwriting costs,” said Rep. Schweikert in a statement. “This bill relieves companies from these costs and excessive burdens and will assist them in efficiently raising funds to hire new employees.”

The companion bill in the Senate, S. 1544, also was referred to the Senate Committee on Banking, Housing and Urban Affairs in September, according to Senator Jon Tester (D-MT) was the sponsor.

Should they move forward, both bills should make it easier for companies to raise money. At least one professional organization – the Biotechnology Industry Organization (BIO) – praised S. 1544 as “a useful capital-raising tool for small, emerging companies that are otherwise without capital funding options beyond the mergers and acquisitions sector. Raising the exemption to $50 million would greatly help cash-strapped companies that are short on resources to raise much needed capital through public offerings without a lengthy paperwork process,” BIO president Jim Greenwood said in a statement.

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Karen Kroll supplies the Business Finance community with reporting and commentary examining cash management and treasury-related topics.

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