Still a Smaller Reporting Company?

Corporate Attorney Daniele Ouellette LevyBy: Daniele Ouellette Levy

Did you know that once a year smaller reporting companies (“SRCs”) are required to determine whether they continue to qualify as an SRC?  For most companies the determination date is June 30 – the last business day of the company’s second fiscal quarter.  To continue to qualify as an SRC, a company’s public float on the determination date must be less than $75M. Public float is calculated by multiplying the number of shares of common stock held by non-affiliates by the closing price (or average bid and ask price) on the determination date.

What changes if a company loses SRC status?  If a company’s public float exceeds $75M as of the determination date it no longer qualifies as an SRC and must transition to the disclosure requirements applicable to larger companies.  Some of the most significant changes include:

Timing?  To assist with the transition in status, the SEC allows companies until the first quarter of the next fiscal year to begin to comply with the heighted disclosure requirements.

May a non-SRC qualify as an SRC?  It is also possible for a non-SRC to transition to SRC status.  This determination is also made as of the last business day of the second fiscal quarter.  For a non-SRC to qualify as an SRC its public float must be less than $50M (or if the company has no public float, must have annual revenue in the last completed fiscal year of less than $40M).  A new SRC may start taking advantage of the scaled disclosure requirements immediately.

For more information on this topic or assistance in determining whether your company qualifies as an SRC please contact Daniele Levy.

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