TALK BACK: What to Do with the 500 Shareholder Rule


Welcome to our new feature, TALK BACK, where the writers and editors of peHUB will engage with readers on a topical issue once a week.

This week’s topic: the 500 shareholder rule.

Yesterday, we reported that House lawmakers are considering expanding the 500 shareholder rule and eliminating certain parties from the new, increased threshold of 1,000 shareholders. Any bill the House comes up with would still have to get through the Senate and signed by President Obama, who has kept mum on his secondary markets stance to date.

Currently, the rule requires that a company begin providing the SEC with filings in anticipation of an IPO if a business entity shareholder base grows beyond 500 people. And the ramifications are such that we couldn’t even cover it all in just one column. So, instead, we’ve decided to crowd-source this one.

Check out our comments section (directly beneath “Related Posts”) and weigh in with whether you feel this is a watershed moment for VCs and secondary markets, or if it is a non-event that isn’t applicable to the overwhelming majority of startups.

Several of us from peHUB — and our sister publications Buyouts and Venture Capital Journal — will chime in on this issue. We welcome debate, and will be checking back to gauge responses.

Keep an eye out for select reader comments in peHUB Wire as the week progresses.