IP Uh Oh

New Bill Proposed Today May Increase the 500-Shareholder Rule to 2,000. You’re Welcome, Facebook!


Apparently, the time is nigh to stop complaining about the 500-shareholder rule and start legislating against it. Fortune.com’s Dan Primack reports that Senators Pat Toomey (R-Pa.) and Tom Carper (D-Del.) introduced new bill today “that would effectively eliminate a rule that many have cited as the reason Facebook may go public next year.”

Prevailing rules stipulate that after hitting 500 shareholders, private companies have to disclose significant financial data. It goes into such detail that most private companies, like Google back in 2004, opt to just go public.

Today’s legislation is a different bill than the one put forth back in June, which proposed amending the Securities Exchange Act of 1934 to accommodate 1,000 stake holders. Rather, the newer bill would increase the limit from 500 to 2,000 and exempt employees from counting towards that threshold (although accredited investors would count towards the total). Currently, employees with stock options are exempt, but actual stock received as compensation is counted.  Read More