An emerging growth company (EGC) is a type of company that benefits from less stringent regulations regarding public information disclosure. The Jumpstart Our Business Startups (JOBS) Act of 2012 established this category to facilitate smaller companies’ access to public markets. To qualify as an EGC, a company must have annual gross revenues of less than $1.07 billion in its most recent fiscal year and must not have sold common stock under a registration statement. EGCs are subject to relaxed disclosure and gun-jumping regulations, allowing them to provide less extensive disclosures in their registration statements and only requiring two years of audited financial statements instead of three. This classification applies for the first five fiscal years of the company, unless specific conditions are met.
An Emerging Growth Company (EGC) is a company type with relaxed disclosure and gun-jumping regulations, created by the Jumpstart Our Business Startups (JOBS) Act of 2012 to increase smaller companies’ access to public markets. According to the Securities Act, an EGC is a company with annual gross revenues less than $1.07 billion during its most recent fiscal year and has not sold common stock under a registration statement. A company will be classified as an EGC for its first five fiscal years, unless its gross revenues exceed $1.07 billion, it has issued over $1 billion in non-convertible debt over three years, or it becomes a large accelerated filer. EGCs have relaxed disclosure and gun-jumping regulations, allowing for less extensive disclosures in their registration statements, such as in the description of executive compensation. They also only need to provide two years of audited financial statements and do not need to provide an auditor attestation of internal controls. This classification allows startups and small companies to access public markets with fewer regulatory requirements, making it easier for them to raise capital.
An Emerging Growth Company (EGC) is a newly formed company with less than $1 billion in annual revenue that is in the process of going public. It was created under the Jumpstart Our Business Startups (JOBS) Act of 2012 to provide regulatory relief and incentives for smaller companies to access the public markets.
EGCs enjoy several benefits, including reduced financial reporting requirements, exemption from certain corporate governance rules, and the ability to confidentially submit draft registration statements to the Securities and Exchange Commission (SEC) for review.
A company can maintain its EGC status until the earliest of the following events: the last day of the fiscal year in which it exceeds $1 billion in annual revenue, the last day of the fiscal year following the fifth anniversary of its initial public offering (IPO), or the date on which it has issued more than $1 billion in non-convertible debt over a three-year period.
Yes, an EGC can choose to opt-out of certain EGC provisions, such as the extended transition period for complying with new or revised accounting standards and the requirement to provide selected financial data in registration statements and periodic reports.
EGCs are required to provide scaled-down financial statements and executive compensation disclosures compared to larger public companies. However, they are still subject to the same anti-fraud and disclosure obligations under federal securities laws.
Yes, an EGC can be sued for securities fraud if it makes false or misleading statements in its offering documents or other public disclosures. EGC status does not provide immunity from liability for securities law violations.
Yes, an EGC can raise capital through crowdfunding under Regulation Crowdfunding, which allows companies to offer and sell securities to the general public through registered crowdfunding platforms.
Yes, an EGC can be eligible for certain exemptions under the Sarbanes-Oxley Act, such as the requirement to obtain an auditor attestation of its internal control over financial reporting.
Yes, an EGC can submit its IPO registration statement to the SEC on a confidential basis, allowing it to keep its financial and business information private until closer to the time of the public offering.
Yes, an EGC can transition to a different reporting status, such as a large accelerated filer or accelerated filer, based on its annual revenue and public float. This transition may subject the company to additional reporting and compliance requirements.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 30th April 2024.
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