The Private Company Flexibility and Growth Act, sponsored by Rep. David Schweikert, would increase the number of shareholders that a company can have before it is required to register with the SEC under the Securities and Exchange Act of 1934. Currently, the shareholder limit is at 500. The bill proposes to increase that limit to 1,000 and to exclude company employees from that count. This bill also requires the SEC to revise the definition of "held of record" to exclude accredited investors and those holders who received the securities pursuant to certain employee compensation plans. The issue of what constitutes "held of record" has been in front of the SEC prior to the introduction of this bill. The current definition of "held of record," which dates back to more than four decades ago, includes only those shareholders identified as owners on the stock records of the company maintained in accordance with accepted practice including records maintained by the company's transfer agent. In the past, it was practical and easy for companies to monitor their shareholder base. Today, the changes in the security markets and shifts in how securities are held make those original assumptions antiquities, as most shares are now held in nominee or street name, thus hiding the real number of beneficial owners.
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Private Company Flexibility and Growth Act
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Cisco Systems, Inc