If your company qualifies as a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K, it may choose to prepare the disclosure in the prospectus relying on scaled disclosure requirements for smaller reporting companies in Regulation S-K and in Article 8 of Regulation S-X.
On June 28, 2018, the Commission adopted amendments to the definition of “smaller reporting company” that were effective on September 10, 2018. Under the new definition, generally, a company qualifies as a “smaller reporting company” if:
- it has public float of less than $250 million or
- it has less than $100 million in annual revenues and
- no public float or
- public float of less than $700 million
Public float is calculated by multiplying the number of the company’s common shares held by non-affiliates by the market price and, in the case of an IPO, adding to that number the product obtained by multiplying the common shares covered by the registration statement by their estimated public offering price. A company may have no public float because it has no public common shares outstanding or because there is no market price for its common shares.
The scaled disclosure requirements for smaller reporting companies permit your company:
- to include less extensive narrative disclosure than required of other reporting companies, particularly in the description of executive compensation and
- to provide audited financial statements for two fiscal years, in contrast to other reporting companies, which must provide audited financial statements for three fiscal years
In addition to the accommodations that are available to smaller reporting companies, there are also different requirements that apply to “non-accelerated filers” and “accelerated filers.” Generally, if a smaller reporting company has:
[+]No public float or public float of less than $75 million
It will be a non-accelerated filer. A non-accelerated filer is not required to provide an auditor attestation of management's assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Sarbanes-Oxley Act Section 404(b), and, in contrast to other reporting companies, has more time to file its periodic reports.
[+]Public float of $75 million or more
It will be an accelerated filer. Among other requirements, accelerated filers are required to provide an auditor’s attestation of management’s assessment of internal control over financial reporting required under Sarbanes-Oxley Act Section 404(b). The Commission, however, has proposed amendments to the accelerated filer definition. If adopted as proposed, smaller reporting companies with less than $100 million in revenues would not be required to obtain an auditor’s attestation of their internal control over financial reporting.
Additional Information and Resources
- Compliance Guide: Smaller Reporting Company Definition
- Press Release: SEC Expands the Scope of Smaller Public Companies that Qualify for Scaled Disclosures
- Sarbanes-Oxley Section 404: A Guide for Small Business
- Press Release: SEC Proposes Amendments to More Appropriately Tailor the Accelerated and Large Accelerated Filer Definitions