At some point in a private company’s growth, it may reach a stage where raising additional capital becomes an important consideration. The company may then decide to go public through an initial public offering (IPO), allowing it to raise capital by offering shares to investors. This involves regulatory requirements, financial disclosures, and other legal matters, making the process challenging to manage alone.
Given these requirements, securing the services of trusted IPO lawyers in the Philippines can be a crucial step for businesses preparing for this transition. An IPO lawyer can provide much-needed legal guidance and help companies navigate this important stage of their growth. Without the right legal support, businesses may find it difficult to establish a strong foundation for the IPO and address potential legal or regulatory issues along the way.
To help businesses understand the value of legal support when preparing to go public, let us explore what an IPO lawyer can do and why their expertise can be important throughout the process.
1) Assess the Company’s IPO Readiness
Before starting the formal IPO process, an IPO lawyer can assess whether the company’s corporate structure, legal affairs, and internal practices are ready for a public offering. This may involve reviewing its articles of incorporation, bylaws, ownership structure, material contracts, and corporate records to identify matters that should be addressed beforehand.
The lawyer can also help the company understand the legal and listing criteria that apply to its intended IPO, including requirements set by the Philippine Stock Exchange (PSE) and Securities and Exchange Commission (SEC). Companies seeking to list on the PSE must meet applicable criteria, which may include requirements relating to operating history, financial performance, stockholders’ equity, public ownership, and the number of stockholders. Meanwhile, the SEC has regulatory and disclosure requirements that companies must satisfy as part of the IPO process. Identifying potential gaps early can give the company time to address them before filing.
2) Help Prepare the Registration and Disclosure Documents
An IPO requires extensive documentation and disclosures. Throughout this stage, an IPO lawyer can assist with preparing and reviewing the registration statement, prospectus, and other documents required by the PSE and SEC. These documents may cover matters such as the company’s business, legal proceedings, government permits and licenses, material contracts, subsidiaries, and the rights of security holders.
In addition, the lawyer can review the information presented to regulators and potential investors to help ensure that the disclosures are accurate and consistent. This can help the company meet its disclosure obligations while giving prospective investors the information they need to evaluate the offering.
3) Conduct Legal Due Diligence
Legal due diligence helps identify issues that could affect the IPO before the offering reaches the market. As part of this process, an IPO lawyer may examine the company’s legal affairs, including its contractual obligations, intellectual property, licenses, permits, and any ongoing disputes. This review can also extend to corporate records and employment-related matters where relevant.
After identifying potential concerns, the lawyer can advise the company on how to address them. This may involve resolving issues with corporate records, permits, contracts, or other legal matters, as well as determining whether certain issues need to be disclosed. Addressing these concerns early may help reduce the risk of legal issues affecting the IPO process.
4) Assist in Strengthening Corporate Governance and Internal Policies
Going public can change how a company is governed and how it interacts with shareholders and the market. An IPO lawyer can help review the company’s board structure, committees, policies, and procedures to determine whether they align with applicable Philippine requirements.
For example, the PSE’s current Main Board criteria require a minimum of seven directors, with at least two directors being independent. The SEC also has a Code of Corporate Governance for Public Companies and Registered Issuers that addresses board responsibilities and areas such as audit, risk management, related-party transactions, nomination, and remuneration. Legal counsel can help the company understand these obligations and make the necessary corporate and policy changes before listing.
5) Coordinate with the Company’s Other IPO Advisers
The IPO process involves several professional advisers, including underwriters or investment banks, accountants, auditors, and financial advisers. To help keep these parties aligned, an IPO lawyer can coordinate with them on legal matters and help ensure that the different aspects of the offering remain consistent.
This can be particularly useful when reviewing the prospectus, responding to regulatory comments, and preparing offering and listing documents. Having legal counsel involved throughout these stages allows the company to address legal questions as they arise and coordinate the necessary responses with its other advisers.
6) Advise the Company on Its Responsibilities After Listing
An IPO lawyer’s role doesn’t necessarily end once the company’s shares are listed. Becoming a publicly listed company brings continuing disclosure and corporate governance responsibilities. Listed companies in the Philippines must comply with applicable PSE disclosure requirements and submit required disclosures through the exchange’s disclosure system.
Legal counsel can help the company understand these ongoing obligations, review disclosures and corporate actions from a legal perspective, and advise management and the board when issues arise. Preparing for these responsibilities before the IPO can help the company make a smoother transition to life as a publicly listed company.
Navigating the IPO Process with Strong Legal Support
Going public is a significant step that requires careful preparation and thorough compliance. Working with an experienced IPO lawyer can help businesses navigate these requirements, address potential legal concerns, and better prepare for their responsibilities as a publicly listed company. With appropriate legal guidance, businesses can approach the IPO process with greater confidence and a stronger foundation for the transition.
