In the field of contract law the effective date is the day that the agreement, or transaction signatories becomes legally binding. In the case of the case of an first public offer (IPO), it is the day when shares first become available for trading through an exchange.
Understanding Effective Dates
Contracts and business agreements are recorded with effective dates. These are when the participants to the agreement take on the obligations they have to fulfill according to the terms of the contract. The contracts may take their form as employment contracts as well as credit or loan contracts or commercial transaction agreements. In the case of the actual “date” is concerned, the parties can decide if the contract is to be officially signed with the date that they signed it or on a date that is already past ( backdating) or on a future date.
For companies that wish going public, the date of effective will be within 30 days from the time the security has been approved by the Securities and Exchange Commission (SEC) which allows the SEC to scrutinize its form S-1 registration to ensure that it is complete in its information so that potential investors can make informed choices. During this time period the SEC may ask questions, ask for clarifications or ask the company to fill in or modify certain sections of the form.
Examples of Effective Dates
The IPO procedure is strictly controlled through the SEC. Twilio Inc. filed for an IPO on May 26 in 2016. The company filed an amended application making sure to include on the cover of the prospectus this information:
The Registrant is hereby changing this registration statement to reflect the date or dates that could be required to delay the date of its effective until the Registrant file an additional amendment that specifically states that this registration declaration will thereafter be effective as per section 8(a) of the Securities Act of 1933 or until the registration statement will become effective on the date according to the Securities and Exchange Commission, acting in accordance with said Section 8(a) can decide.
The date that became effective turned out to be 23rd June 2016. Twilio’s shares were traded on that day.
On websites, effective dates can be typically found in the terms and conditions as well as privacy policies. If a company does not make an effort to make an individual agreement with a specific end-user or group of users, the terms and conditions (or conditions of use) as well as a privacy policy will be applicable to all users on any website or online platform.
Users must generally agree to these terms whenever they download an application or access the website. These terms shouldn’t differ from the terms that are that are provided to or the other user at any other time , unless they are amended and users are asked to accept the updated conditions.
In such cases the date that becomes effective for the terms and conditions or privacy policies is not when the user has signed it, but rather when they were the last time that terms and conditions were revised. In these kinds of agreements, the dates are not marked by “effective date” but “last revision” or “last updated.”
