Conflict of interest in IPO

Equity capital markets (ECM)

Today’s post in on conflict of interest (“COI”) in IPO.

The due diligence working group for an IPO may be preparing for submission of the IPO at full speed until the advisers discover COI situations in the course of their due diligence. In certain cases, the IPO submission has to be delayed to allow the COI to be resolved.

As it takes time to resolve COI issues, it is worthwhile carrying out the assessment of COI at the outset of an IPO exercise.

Under the Equity Guidelines, a company undertaking an IPO and listing on the Main Market (“applicant”) is required to assess all aspects of its business to determine whether there are COI situations. An applicant must resolve, eliminate or mitigate all COI situations.

Situations that are likely to give rise to COI include circumstances where interested persons:

1. have an interest in a competing business with that of the applicant’s or its subsidiary companies;

2. conduct or have interest in business transactions involving goods or services, either directly or indirectly, with the applicant or its subsidiary companies;

3. provide or receive financial assistance from the applicant or its subsidiary companies; and

4. lease property to or from the applicant or its subsidiary companies.

“Interested persons” include directors, major shareholders and chief executive of the applicant.



This post was first posted on Linkedin on 13 September 2021.

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