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Smaller reporting company


Reporting company or reporting issuer is a company that is obliged to file periodic reports under section 13 or 15 (d) of Securities Exchange Act. There are couple of reason why companies become reporting issuers. One of the reasons is securities exchange listing. Before securities can be traded on one of the exchanges they must be registered with Securities and Exchange Commission. Another reason is size threshold. If company has assets worth more than $10 million and a class of equity securities held by 2,000 person or 50 or more non accredited investors. Companies that issue securities but are not listed on any exchanges are also subject to Securities Exchange Act. In the first two cases company must file periodic and current reports.

SEC divides reporting companies that file periodic reports under Securities Exchange Act of 1934 into different categories based on size among other factors. Smaller companies have less stringent reporting requirements and are exempt from certain provisions of the Sarbanes-Oxley Act of 2002. If company qualifies to be smaller reporting company it may prepare disclosure in the prospectus relying on scaled disclosure requirements. In 2018. Commission adopted amendments to the definition of smaller reporting company: if company's public float is less than $250 million or it has less than $100 million in revenues and no public float (or public float less than $700 million). Public float is calculated by multiplying company's common shares held by non-affiliates (meaning excluding managers and certain large investors) by the market price.

What scaled disclosure enables you is less extensive narrative disclosure, particularly in executives compensation and to provide audited financial statements for two fiscal years (while others do three years). If your company doesn't have public float or float less than $75 million it is considered non-accelerated filer and you will not be required to provide an auditor attestation of management's assessment over financial reporting of internal control under Sarbanes-Oxley Act. Also it enables more time to do periodic reports. Accelerated filer has public float higher than $75 million and they are required to provide an auditor attestation of management's assessment of internal control over financial reporting. Sarbanes-Oxley Act of 2002 resulted in requirement that management must individually certify the accuracy and completeness of financial information. It increased oversight role of board of directors and the independence of the outside auditors who review the accuracy of financial statements. 
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