Legislation Introduced to Improve SOX Requirements for Small Businesses
Congressman Ben Quayle from Arizona’s third district recently introduced H.R. 2941, the Startup Expansion and Investment Act, which will allow shareholders of public companies with market valuations below $1 billion to opt out of regulations within section 404 for the first 10 years after going public. The costs for complying with the requirements of this section of Sarbanes-Oxley can exceed $1 million for new companies and can cost them up to $20 million in loss of valuation.
The idea embodied in this legislation is consistent with a proposal in the Ewing Marion Kauffman Foundation’s Startup Act of 2011, a set of non-partisan ideas to jump-start the ailing U.S. economy and increase job creation by accelerating the growth of startups and young businesses.
The Foundation’s Startup Act, based on its extensive research, focuses attention on the central role that high-growth startups must play to assure continued U.S. economic strength. The benefits of startups are well-established: Virtually all of the growth in U.S. jobs has been driven by the formation of firms less than five years old, and these new firms have been disproportionately responsible for commercializing the cutting-edge innovations that characterize modern life.
“I believe this bill is an important step as we try to increase the number of companies that go public in the United States,” said Robert Litan, vice president for research and policy at the Kauffman Foundation. “The ability to raise capital in public markets will be essential as new companies create the jobs required to put Americans back to work.”