The Securities and Exchange Commission (SEC) made two major announcements in December 2007 that will affect thousands of small businesses in the US, both public and private. The changes won’t take place until early this year, but you can put this information to use right now.

The first announcement dealt with capital acquisition, which was simplified and streamlined for companies with market capitalization of up to $75 million. The former rule limited the use of simplified paperwork to companies with a float of up to $25 million. Until this change, corporations with a market capitalization over $25 million had more, and – many experts argued – not very useful paperwork to complete for the SEC in order to offer new or first-time shares to the public. This change will make it easier for some 1500 additional small companies to access capital markets, consistent with protecting investors who put money into them.

The second announcement was for a 12-month delay in implementing the requirements of the 2002 Sarbanes-Oxley legislation (SOX) for small businesses, due to the disproportionate costs it might cause them. This is only a delay. SEC Chairman Chris Cox wanted to see this law extended to all businesses in December 2007, but will await the findings of a study to be completed by June 2008. If you have a small public company or are taking your company public in the future, 2008 may be a the last year you can do so without incurring the accounting cost of SOX legislation in your initial calculations.

Taken together, these two announcements present a special opportunity for small businesses going public or selling stock to acquire capital. The streamlined capital acquisition rulings make this a good time to go forward. As well, the delay in implementing the SOX requirements for at least a year gives new companies the opportunity to install and road test the controls that will most likely become mandatory.

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