Vanderbilt Law Review

First Page



The year 1969 has seen a continuation of the strong new issues market that has commanded a significant portion of the attention of the investing public over the past few years. As a result, more and more closely held companies are seeking to raise funds through public offerings of their stock and thus share in the successes of this strong market. While the market conditions have been most encouraging,there have been other developments that have made the managements of some closely held companies reconsider the relative advantages and disadvantages of going public. Recent court decisions have strictly defined the legal responsibilities and potential liabilities of management of publicly held companies. The costs of going public, both in money and in the time of management, have also steadily increased. Moreover, these trends seem likely to continue as more extensive reporting requirements are applied to public companies under the federal securities laws. What is the real substance of these new cases and the costs of being a publicly held company? What is behind the furor over such cases as BarChris, Globus and Texas Gulf Sulphur? Are accountants,underwriters, lawyers, and corporate executives now required to meet impossible standards in the preparation of a registration statement and are they subject to substantial liabilities for any failure to fulfill these standards? Perhaps most importantly, how do these new developments affect the varied and interdependent questions and considerations against which a decision to go public has traditionally been measured? The purpose of this article is to answer some of these questions. It will analyze the advantages and disadvantages of going public in the context of these new cases and in the context of these increasing costs. It will then compare the results of going public with the results obtained by some other means of raising capital for closely held companies. From these analyses the reader can reach some conclusions as to the best course of action for his client or company to follow.