The Future Of Capital Formation And The 499 Shareholder Rule
While a majority of the media in the US continue to stay focused on the vociferous public discourse taking place over the future of capitalism, it is noteworthy to point out the rule which states that once a private company in the US has more than 499 shareholders, the Securities and Exchange Commission [SEC] requires it to make financial disclosures as if it were a public company. A potential new regulation will lift the 499 shareholder limit, which will make it easier for companies to remain private. According to this article, proponents of the new regulation argue that fees and financial statement disclosure requirements preclude companies from forming the capital that is necessary for innovation. Opponents argue that the regulations favor private companies remaining private, thus keeping their investors “in the dark” regarding their finances and operations. Additionally, it is argued that lifting the 499 shareholder rule denies the investing public the opportunity to derive an economic benefit from an initial public offering of stock [IPO].
