In the highly partisan atmosphere of a presidential election year, the U.S. House of Representatives almost did the unthinkable on March 8, 2012, when it approved business-related legislation with broad bipartisan support.
The Jumpstart Our Business Start-ups or the JOBS Act (H.R. 3606) is designed to help startup employers by relaxing regulations imposed after the dot-com stock bust of 1999 and 2000. The House passed the bill 390-23, which drew attention because of the overwhelming bipartisan support.
Strong backing from House leaders came as a surprise to many observers because President Barack Obama pushed strongly for passage. Leaders from both sides of the aisle praised the House’s action, saying it showed that bipartisanship can work and that Congress isn’t quite as moribund as many critics claim.
“The House vote really demonstrates that we are able to set aside our differences when we want to and come together to produce results that people want to see,” said House Majority Leader Eric Cantor, R-Va. “The president asked us in the State of the Union address to send him a bill that helps business startups. The JOBS Act does just that.”
In an effort to help businesses attract investors and acquire loans, the bill relaxes several regulations. It would allow companies with less than $1 billion in annual sales, or that are selling less than $700 million of stock, to give investors two years of financial reports before the businesses make a public stock offering. Current law requires three years of financial reports. In addition, the legislation would allow investment banks to publish research about their clients’ stock offering deals prior to an initial public offering (IPO). Now, banks are barred from releasing this information under a so-called “quiet period” rule, which was designed to prevent the manipulation of stock prices.
The proposal would increase the amount of stock private companies can sell as part of a public offering before registering with the Securities and Exchange Commission (SEC) from $5 million to $50 million. And it would raise the number of shareholders permitted to invest in a community bank from 500 to 2,000.
Sources familiar with the issue say the changes proposed in the legislation would give new companies more flexibility in raising capital, which would allow the businesses to expand more quickly and create more jobs.
“The House of Representatives voted in favor of thriving capital markets and U.S. job creation,” Paul Maeder, chairman of the National Venture Capital Association (NVCA) and co-founder of Cambridge, Mass.-based Highland Capital Partners, said in a written statement. “The proposal allows promising companies to continue on their growth trajectories, further develop products and services and hire more employees.”
According to the NVCA, nearly 12 million employees in the U.S. work for organizations that began as venture capital startups. Business groups are urging the Senate to move quickly to pass the bill.
“Now is the time for the Senate to add its weight behind passage of this legislation so that the positive impact of the law can be realized as soon as possible,” said Kate Mitchell, a spokesperson for the NVCA and managing director of Scale Venture Partners in Foster City, Calif.
H.R. 3606 was introduced in the Senate on March 12, 2012, and was placed on the legislative calendar. According to sources familiar with the issue, the bill was gathering bipartisan support in the Senate and could be voted on before Congress adjourns for its Easter holiday recess in early April 2012.
Bill Leonard is a senior writer for SHRM.