SEC Amends Definition of ‘Smaller Reporting Company’

August 28, 2018

On June 28, the SEC announced that it had voted to amend the definition of “smaller reporting company” (SRC) to expand the number of companies that qualify for certain existing scaled disclosure accommodations (e.g., fewer years of financial statements and heavily abbreviated executive compensation disclosure). The expanded definition enables companies with a public float of less than $250 million to qualify as SRCs, as compared to the $75 million threshold under the prior definition. Companies with less than $100 million in annual revenues will also qualify as SRCs if they have either no public float or a public float of less than $700 million, a substantial loosening of the revenue test under the prior definition, which required companies to have less than $50 million in revenues and no public float. The SEC estimates that 966 additional companies will be eligible for SRC status in the first year under the new definition, which takes effect on September 10, 2018.

Curiously, qualifying as an SRC will no longer automatically make a company a non-accelerated filer. Until the SEC takes further action, SRCs with $75 million or more of public float will remain subject to the requirements that apply to accelerated filers, including the timing of the filing of periodic reports and the requirement to provide an auditor’s attestation of management’s assessment of internal control over financial reporting.

For more on the relaxed SRC definition, including details regarding technical revisions to the cover pages of Forms S-1, S-3, S-4, S-8, S-11, 10, 10-Q and 10-K, see the SEC’s final rule and small entity compliance guide.

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