Companies that qualify as emerging growth companies (EGCs) as a result of a 2012 law are asking for relief from the U.S. Securities and Exchange Commission (SEC) now that the five-year limitation for the EGC Status is running out.

The sticking point hinges on revenues and reporting requirements: EGCs lose their emerging status after five years if they achieve revenues or issue securities valued at slightly more than $1 billion dollars, if they go public, or if they become a large accelerated filer marked by a non-affiliated public float of $750 million or more.

Without EGC Status, those companies also lose the advantage of scaled-down disclosure and reporting requirements, relief from auditing requirements in the Sarbanes-Oxley Act, certain test-the-waters provisions of initial public offerings (IPOs) and other less burdensome rules.

And being subjected to more complicated disclosure and filings requirements, the companies argue, is both costly and can limit their access to public markets when they seek further investments or decide to go public.

Writing in the Securities Law Blog in a post titled Emerging Growth Companies

Will Start to Grow Up, West Palm Beach attorney Laura Anthony, a securities investment specialist who founded Legal and Compliance, LLC, notes that 85% of IPOs since the 2012 passage of the JOBS Act have been completed by EGCs a large percentage of which will not qualify as a smaller reporting company and the scaled-down requirements they also enjoy.

Moreover, EGCs will have to wait until the SEC finalizes amendments that would redefine smaller reporting companies as those with less than $250 million in public float (versus the existing $75 million) or less than $100 million in annual revenues, Ms. Anthony writes.

There is some hope for these companies, according to Ms. Anthony, who describes testimony from the CEO of one EGC a pre-revenue pharmaceutical start-up. According to the quoted CEO, losing EGC Status would create burdensome compliance costs as a deterrent to accessing public markets.

The current SEC administration, Mrs. Anthony explains, is supportive of capital-raising efforts and decreased, unnecessary reputation, for companies both large and small. Several SEC executives, as well as the SECs Government-Business Forum on Small Business Capital Formation, support a revised or scaled definition of smaller reporting companies and an accompanying easing of reporting guidelines and revenue thresholds. Without an amended definition, companies that lose EGC Status and do not qualify as smaller reporting companies will be defined as non-accelerated filers, accelerated filers or large accelerated filers and the concomitant filing and reporting requirements for each.

Ms. Anthonys November 7 blog post includes two helpful charts that highlight:

the various reporting requirements among EGCs, smaller reporting companies, non-accelerated filers, accelerated filers, and large accelerated filers

differences among the scaled disclosure requirements, EGC requirements, and smaller reporting company requirements.