The U.S. Securities and Exchange Commission (the “SEC”) recently adopted a new EDGAR Filer Manual,1 which provides that effective October 15, 2012, emerging growth companies under the Jumpstart Our Business Startups Act (“JOBS Act”) must now use EDGAR to submit confidential draft registration statements. In addition, the SEC posted additional Frequently Asked Questions concerning the JOBS Act with respect to topics including the applicability of the JOBS Act to mergers and acquisitions transactions, financial information requirements under the JOBS Act, and the potential for formerly public entities to be emerging growth companies.
Confidential Submission of Draft Registration Statements
The JOBS Act permits emerging growth companies to submit draft registration statements to the SEC for confidential, non-public review. Confidential submissions allow emerging growth companies to privately undergo the SEC review process, but the submissions must be publicly filed with the SEC no later than 21 days before the issuer commences a road show. Effective October 15, 2012, emerging growth companies must now use the SEC’s recently modified EDGAR system to confidentially submit draft registration statements and amendments.
Prior to October 1, 2012, confidential draft registration statements were submitted as searchable PDFs through the SEC’s secure e-mail system, and beginning October 1, 2012, emerging growth companies had been able to voluntarily submit confidential draft registration statements on EDGAR. On October 15, 2012, the confidential submission of draft registration statements through EDGAR became mandatory.
Issuers that previously submitted a confidential draft registration statement to the SEC via the secure e-mail system must submit any future confidential draft registration statements and amendments using EDGAR going forward. Any confidential draft registration statements and amendments previously submitted via the SEC’s secure e-mail system should be attached as exhibits to the first submission of the registration statement made through EDGAR, whether or not made confidentially.
Public Filing of Draft Registration Statements
The updated EDGAR system also facilitates the public filing of draft registration statements as a standalone filing to the SEC website to comply with the requirement that draft copies of the registration statement be publicly filed with the SEC no later than 21 days before commencement of a roadshow. Issuers may now publicly “disseminate” confidential draft registration statements and amendments previously submitted through EDGAR by making a selection on EDGAR that makes the previously filed registration statement public, rather than making an additional filing.
Signatures on Draft Registration Statements
The SEC clarified in Question 52 of its FAQ that confidential draft registration statements need not be signed by the emerging growth company or any of its officers or directors, and emerging growth companies do not need to provide the consent of auditors or other financial experts because the confidential draft registration statements are not "filed" with the SEC.
The SEC also posted instructions on the preparation and submission of a draft registration statement on EDGAR, which can be found here.
Exchange Offers and Mergers and Acquisitions Transactions
In Questions 43 and 44 of its FAQ, the SEC explained that emerging growth companies can use the confidential submission process to submit a draft registration statement for an exchange offer or merger that will constitute the emerging growth company’s initial public offering of common stock.
If an emerging growth company involved in an exchange offer or merger uses the confidential submission process, it must publicly file the registration statement at least 21 days before the earlier of the road show (if any) or the anticipated date of effectiveness of the registration statement. In any event, the registration statement must be publicly filed no later than the date of commencement of an exchange offer.
Emerging growth companies involved in an exchange offer must file the tender offer statement on Schedule TO on the date that the exchange offer commences. An emerging growth company must also make the required filings under Securities Act Rule 425 (unless it is relying on the Securities Act Section 5(d) provision for test-the-waters communications) and Exchange Act Rules 13e-4(c) and 14d-2(b) for pre-commencement tender offer communications.
Financial Data Disclosure after Loss of Emerging Growth Company Status
Emerging growth companies enjoy scaled financial disclosure with respect to the number of years of audited financial statements required to be presented beginning with their initial public offering of common equity securities. If an issuer loses its status as an emerging growth company, it will have to meet the full disclosure requirements in subsequently filed registration statements and periodic reports. The SEC explained in Question 50 of its FAQ, however, that it will not object if, in future reports, an issuer that has lost its emerging growth company status does not present selected financial data or a ratio of earnings to fixed charges for periods prior to the earliest audited period presented in its initial registration statement.
Spin-Offs and Formerly Public Companies
In Question 53 of its FAQ, the SEC explained that a spun-off entity may qualify as an emerging growth company even if its former parent entity would not. This applies if the parent company spun off a wholly owned subsidiary or transferred a business into a newly formed subsidiary to register an offer and sale of the subsidiary’s common stock for an initial public offering. The SEC explained that the analysis for whether the subsidiary is an emerging growth company is focused on the issuer and not the parent. In these types of transactions, emerging growth company status may be questioned if it appears that the issuer or its parent is engaging in a transaction for the purpose of converting a non-emerging growth company into an emerging growth company or for the purpose of obtaining the benefits of emerging growth company status indirectly when not entitled to do so directly.
According to Question 54 of the FAQ, formerly public companies otherwise qualifying as an emerging growth company may take advantage of emerging growth company status even if they publicly offered common equity securities on or before December 8, 2011. The SEC cautioned, however, that emerging growth company status may be questioned if it appears that the issuer ceased to be a reporting company for the purpose of conducting a registered offering as an emerging growth company.