One of the key regulations forcing private companies like Facebook and Zynga to go public could be torn up, Dan Primack at Fortune reports.Legislation is about to be introduced in Congress to expand the 500 shareholder limit to 1,000 shareholders.
Once a company has 500 shareholders it has to start disclosing its financials to the public. Once companies are forced to disclose financials, they may as well hit the public markets, raise some money and get a liquid asset in the form of their stock.
Not only will the shareholder limit expand, but the way shareholders are counted will change as well. Accredited investors and employees won’t count towards the 1,000. An accredited investor ranges from VCs to mutual funds to millionaires.
If this rule is passed then private companies will be able to stay private pretty much forever, says Primack.
Right now Primack hears it has 6 backers in the House of Representatives. He says it is being introduced by Reps. David Schweikert (R-AZ) and Jim Himes (D-CT). It still doesn’t have a bill in the Senate, and it still needs to get the SEC on board, which means it could be until 2012 before this thing is passed.
Because it will take a while to pass it shouldn’t have any affect on Facebook’s 2012 IPO plans. Though, Primack suggests Facebook could ask the SEC for an exemption if the legislation is moving along.
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