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Smaller Reporting Companies Are Getting Larger

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July 12, 2018 | Barbara Baksa

Smaller Reporting Companies Are Getting Larger

On June 28, the SEC released amendments to the definition of a “smaller reporting company” that significantly expand the threshold up to which a company can be considered a smaller reporting company. By “significantly,” I mean more than doubling the threshold under one of the applicable tests. If you weren’t a smaller reporting company before, maybe you are now.

These rules are well outside my wheelhouse and I have not read all 105 pages of the SEC’s release. Or, well, any pages of it. My reading on this is limited to Mike Melbinger’s blog for Mike provides a nice three-paragraph summary of the rule change that I could not possibly improve upon, so I’m just going to repeat his blog here:

SEC reporting rules are less demanding for a smaller reporting company (“SRC”).  For example, for proxy statement reporting, an SRC need only report compensation information for the CEO and the two most highly compensated executive officers (and up to two additional individuals no longer serving as executive officers at year end).  

Currently, if a company’s public float is less than $75,000,000, it will qualify as an SRC.  When the amendments become effective at the end of August, if a company’s public float was less than $250,000,000 at the end of its second fiscal quarter (June 2018 for calendar year companies), it will qualify as an SRC for 2018. 

The company itself determines whether it qualifies as an SRC and, if it determines that it so qualifies, may elect to file as an SRC.  The determination does not need to be cleared with the SEC or require a legal determination from the SEC.

I’ll write more on how to calculate SRC status and the reporting differences available to SRCs later this week.

If you want more information, PwC has published a more in-depth (but still nicely succinct) alert on the rule change.

- Barbara

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