I'm okay up until Stay private if they have over 500 shareholders
Honestly, You're not a startup if you have over 500 shareholders, You're basically a public company with no disclosure requirements for investors. Why would anyone go public if they can just sell all their shares on secondmarket and not have disclose anything? That rule is in place to protect investors.
I was under the impression that the raising of the 500 shareholder limit was to allow the crowdfunding aspect to be meaningful; 500 investors at $100 a pop is only $50,000 that makes a certain amount of sense.
I, too, am weary of this provision. If there is no obligation to make information available, all this will do is embolden the inside-track of investors who can get information at the expense of everyone else. There will be strong pressure for the former to misrepresent and mislead the latter, and now that the cap of 500 investors has been lifted, the latter type of investor -- one with low leverage, in particular -- is available in much greater supply. Yet, I find the idea of allowing many smaller investors participating in the funding of a company compelling, but it is more likely that there will be a lot of heterogeneity in the size and leverage of investors in a firm that seems to me that it could lead to a lot of ugly situations.
Are there even minimal disclosure requirements in this bill for such "emerging" companies? The cutoff for being under this bill's aegis is, if I read it properly, one billion dollars. That's quite a chunk of change, and it seems like at that size (or even at $50,000 dollars) one can hire an accountant to do some minimal reporting is not too much to ask, or do it themselves when the firm is small.
I am a fan of less regulation when it seems like information asymmetry is treated to some degree, as so all actors can make a reasonable rational choice. It's not clear to me this is the case here. I would love to be informed as to otherwise.
I know almost nothing about Sarbanes-Oxley, but I've seen critics claim that compliance costs nearly a million dollars for even the smallest public companies. Can a $50k company survive in the current environment without remaining privately held by the founders or a small group of accredited investors?
SOX is pretty extreme. I don't think it even applies to organizations that go over the 500 (soon to be 2000 with this bill, is that actually enough for super-microfunded kickstarter style startups?) investor limit, but I am no expert.
I'm not asking for much. Maybe even just what is filed for tax returns would be enough, or maybe not (or maybe it's more than necessary). It just seems like no disclosure obligations at all (and I'm not even sure if that's what the bill actually provides) is too few obligations.
Case in point, Facebook. For a long time -- may be even now -- authoritative numbers of numbers like revenue or profit that would be seen on their tax filing are probably only known to investors with sufficient leverage, AFAIK. Again, not intended to be an assertion; countervailing knowledge welcomed.
Honestly, You're not a startup if you have over 500 shareholders, You're basically a public company with no disclosure requirements for investors. Why would anyone go public if they can just sell all their shares on secondmarket and not have disclose anything? That rule is in place to protect investors.