Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013by Representative Scott Garrett
Posted on 2014-01-14
GARRETT. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 2274) to amend the Securities Exchange Act of 1934 to
provide for a notice-filing registration procedure for brokers
performing services in connection with the transfer of ownership of
smaller privately held companies and to provide for regulation
appropriate to the limited scope of the activities of such brokers, as
The Clerk read the title of the bill.
The text of the bill is as follows: H.R. 2274 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013''.
SEC. 2. REGISTRATION EXEMPTION FOR MERGER AND ACQUISITION BROKERS.
Section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) is amended by adding at the end the following: ``(13) Registration exemption for merger and acquisition brokers.-- ``(A) In general.--Except as provided in subparagraph (B), an M&A broker shall be exempt from registration under this section.
``(B) Excluded activities.--An M&A broker is not exempt from registration under this paragraph if such broker does any of the following: ``(i) Directly or indirectly, in connection with the transfer of ownership of an eligible privately held company, receives, holds, transmits, or has custody of the funds or securities to be exchanged by the parties to the transaction.
``(ii) Engages on behalf of an issuer in a public offering of any class of securities that is registered, or is required to be registered, with the Commission under section 12 or with respect to which the issuer files, or is required to file, periodic information, documents, and reports under subsection (d).
``(C) Rule of construction.--Nothing in this paragraph shall be construed to limit any other authority of the Commission to exempt any person, or any class of persons, from any provision of this title, or from any provision of any rule or regulation thereunder.
``(D) Definitions.--In this paragraph: ``(i) Control.--The term `control' means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise. There is a presumption of control for any person who-- ``(I) is a director, general partner, member or manager of a limited liability company, or officer exercising executive responsibility (or has similar status or functions); ``(II) has the right to vote 20 percent or more of a class of voting securities or the power to sell or direct the sale of 20 percent or more of a class of voting securities; or ``(III) in the case of a partnership or limited liability company, has the right to receive upon dissolution, or has contributed, 20 percent or more of the capital.
``(ii) Eligible privately held company.--The term `eligible privately held company' means a company that meets both of the following conditions: ``(I) The company does not have any class of securities registered, or required to be registered, with the Commission under section 12 or with respect to which the company files, or is required to file, periodic information, documents, and reports under subsection (d).
``(II) In the fiscal year ending immediately before the fiscal year in which the services of the M&A broker are initially engaged with respect to the securities transaction, the company meets either or both of the following conditions (determined in accordance with the historical financial accounting records of the company): [[Page H193]] ``(aa) The earnings of the company before interest, taxes, depreciation, and amortization are less than $25,000,000.
``(bb) The gross revenues of the company are less than $250,000,000.
``(iii) M&A broker.--The term `M&A broker' means a broker, and any person associated with a broker, engaged in the business of effecting securities transactions solely in connection with the transfer of ownership of an eligible privately held company, regardless of whether the broker acts on behalf of a seller or buyer, through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the eligible privately held company, if the broker reasonably believes that-- ``(I) upon consummation of the transaction, any person acquiring securities or assets of the eligible privately held company, acting alone or in concert, will control and, directly or indirectly, will be active in the management of the eligible privately held company or the business conducted with the assets of the eligible privately held company; and ``(II) if any person is offered securities in exchange for securities or assets of the eligible privately held company, such person will, prior to becoming legally bound to consummate the transaction, receive or have reasonable access to the most recent year-end balance sheet, income statement, statement of changes in financial position, and statement of owner's equity of the issuer of the securities offered in exchange, and, if the financial statements of the issuer are audited, the related report of the independent auditor, a balance sheet dated not more than 120 days before the date of the offer, and information pertaining to the management, business, results of operations for the period covered by the foregoing financial statements, and material loss contingencies of the issuer.
``(E) Inflation adjustment.-- ``(i) In general.--On the date that is 5 years after the date of the enactment of the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013, and every 5 years thereafter, each dollar amount in subparagraph (D)(ii)(II) shall be adjusted by-- ``(I) dividing the annual value of the Employment Cost Index For Wages and Salaries, Private Industry Workers (or any successor index), as published by the Bureau of Labor Statistics, for the calendar year preceding the calendar year in which the adjustment is being made by the annual value of such index (or successor) for the calendar year ending December 31, 2012; and ``(II) multiplying such dollar amount by the quotient obtained under subclause (I).
``(ii) Rounding.--Each dollar amount determined under clause (i) shall be rounded to the nearest multiple of $100,000.''.
SEC. 3. EFFECTIVE DATE.
This Act and any amendment made by this Act shall take effect on the date that is 90 days after the date of the enactment of this Act.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New Jersey (Mr. Garrett) and the gentlewoman from Alabama (Ms. Sewell) each will control 20 minutes.
The Chair recognizes the gentleman from New Jersey.
General Leave Mr. GARRETT. Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days within which to revise and extend their remarks and to submit extraneous materials for the Record on H.R. 2274, as amended, currently under consideration.
The SPEAKER pro tempore. Is there objection to the request of the gentleman from New Jersey? There was no objection.
Mr. GARRETT. Mr. Speaker, at this point, I yield myself such time as I may consume.
I rise in support of this good piece of legislation, H.R. 2274. It is the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act. It is introduced by the gentleman from Michigan (Mr. Huizenga), who will be speaking momentarily.
Mr. Speaker, during the period of overly burdensome Big Government-- of ObamaCare and of Dodd-Frank and thousands and thousands more regulations costing Americans literally trillions of dollars--it is really no surprise that the economic growth and job creation in this country remain sluggish.
America's small businesses are the primary engine of job creation, for they are the ones who are disproportionately affected by simply a deluge of new rules and regulations coming out of Washington daily. In fact, according to a recent survey, small businesses continue to identify government regulation and red tape as the single most important problem facing them.
While our colleagues in the Senate appear unwilling these days to pass any legislation to help create jobs, well, we have H.R. 2274 in the House that we take up, and it is done in a bipartisan manner. It is a commonsense piece of legislation that will remove some of these unnecessary regulations and obstacles to small business development, growth, and job creation.
What it would do is exempt brokers who perform services in connection with the transfer of ownership of small, privately held companies--that are also known as M&A brokers--from the SEC's costly one-size-fits-all registration requirements that we have right now.
While terms that we sometimes hear in the press and elsewhere-- mergers, acquisitions, brokers--may give you the image of big Wall Streets and what have you, make no mistake about it, this bill is about helping Main Street.
M&A brokers play a very, very important role helping small businesses and small business owners successfully navigate their way through and transfer their company, or sell their company, to new owners, new enterprises, instead of simply closing up their shop and going out of business.
Yet under the current SEC one-size-fits-all registration regime, M&A brokers face a myriad of costly regulations. Unfortunately, M&A brokers have to pass these costs on to, well, other small businesses and, of course, eventually the public.
It is no wonder this legislation has now received widespread and bipartisan support. In fact, this bill was unanimously approved by the committee 57-0. Let me get that straight: 57-0.
I would like to thank the sponsor, Mr. Huizenga, for all his hard work on this legislation and bringing it to the floor at a time like this when America's small businesses are struggling through a mire of regulation and red tape. This type of bipartisan pro-small business, pro-jobs legislation is exactly the type of thing we need.
I urge my colleagues on both sides to pass it, as we did in the committee, in a bipartisan manner.
Mr. Speaker, I reserve the balance of my time.