Bipartisan Senate Action on Capital Formation Bills is Good News for Entrepreneurs and Startups

By at 13 September, 2017, 12:40 pm



Washington, D.C.  A leading advocate for entrepreneurs said small business owners are pleased that the U.S. Senate passed key pieces of legislation to strengthen capital formation and access, while also improving a tool that helps startups and small businesses attract and retain the employees they need to successfully scale their enterprises. The three bills passed the Senate on the evening of September 11 by unanimous consent or voice vote, and previously passed the U.S. House on a wide bipartisan basis as well.  Small Business & Entrepreneurship Council (SBE Council) president & CEO Karen Kerrigan said the bills are three of many bipartisan initiatives that, if sent to President Trump’s desk for his signature, would make a big difference for small businesses and entrepreneurship across America.

“Contrary to reporting by many in the media that partisanship has gridlocked the legislative process in Washington, there are a significant number of bipartisan bills moving through both chambers of Congress and obviously some have already reached the President’s desk.  The latest batch of bills, which await another procedural move in the House, is proof that Washington can work to help our nation’s startups and small businesses. We are grateful that Majority Leader Mitch McConnell is keeping an eye out for these bipartisan opportunities to improve the environment for entrepreneurship and small business growth,” said Kerrigan.

The bills – three of eleven that passed by unanimous consent or voice vote on September 11 – include: S.444, the Supporting America’s Innovators Act (House version H.R. 1219, passed 417-3); S.416, the Small Business Capital Formation Enhancement Act (House version: H.R. 1312, which passed 406-0); and S.488, Encouraging Employee Ownership Act (House version H.R. 1343, passed 331-17).    

What the Bills Do

Supporting America’s Innovators Act: This legislation amends an exemption under the Investment Company Act of 1940 by increasing the investor limitation from 100 to 250 people for qualifying venture capital funds. Modernizing this limitation will lower a key barrier facing promising startups and small firms. The change will permit more investors to participate in venture capital-type funds, and startups and small businesses everywhere will benefit.

Small Business Capital Formation Enhancement Act: SBE Council and our members have been engaged in the Securities and Exchange Commission (SEC) Government-Business Forum on Small Business Capital Formation for nearly fifteen years. Scores of common sense changes and reforms reached by consensus at these forums have not been acted upon. Many of these reforms are needed to improve capital formation for entrepreneurs, and to make smart changes to streamline compliance. The bill requires the SEC to take action by acknowledging these recommendations, and how they plan to take action. Entrepreneurs, investors and experts take the time out of their schedules to prepare for, participate and provide input at the forum.

Encouraging Employee Ownership Act:  America’s entrepreneurial firms drive the economy, and many small innovative firms use stock options as part of their compensation packages to attract and retain employees.  The current threshold (under SEC Rule 701), where additional disclosure is required when firms sell more than $5 million in securities for employee compensation over a 12 month period, is a deterrent that prevents firms from offering stock options. Small businesses and their workforce both lose under this arbitrary threshold. The bill would raise the threshold to $10 million and index it every five years thereafter. This reasonable increase provides more flexibility and incentive for firms to leverage this win-win compensation tool, which helps them retain loyal employees and compete for the human capital they need to successfully scale.

Kerrigan concluded by observing that moving these widely bipartisan and meaningful reform bills to the President desks is a smart strategy that can continue to improve capital access, small business growth and entrepreneurship in America while working on some of the bigger issues that are important to small businesses:

“At the same time Congress is advancing tax reform, it can also focus on these bipartisan bills that make important policy changes. These reforms will make our economy, small businesses and capital markets more competitive. Entrepreneurs and small businesses look forward to more of this type of progress by the Congress,” added Kerrigan.

Karen Kerrigan,
SBE Council is a nonpartisan, nonprofit advocacy, research and education organization that works to protect small business and promote entrepreneurship. For nearly 25 years SBE Council has worked to successfully implement a range of policy and private sector initiatives to strengthen the ecosystem for startups and small business growth. To learn more, visit SBE Council’s website: Follow on Twitter: @SBECouncil

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