IPO: Indirect equity interest


Verification on indirect equity interest for IPO requires attention to details.

It could also be time consuming.

For a particular IPO exercise, my colleague and I pored over more than a hundred of company searches and asked the management of the applicant company tons of questions to verify the information. I think all of us were very glad when we completed the drafting of the relevant section in the draft prospectus.

The Prospectus Guidelines require disclosure on principal business activities outside the applicant and its subsidiaries (“Group”) in respect of the applicant’s directors, key senior management and key technical personnel (“Relevant Persons”). This includes their indirect equity interest held outside the Group.

There are a few ways to conduct due diligence on the indirect equity interest of the Relevant Persons as follows:

1. Conduct searches with the Companies Commission of Malaysia on the shareholding, directorship and business of the Relevant Persons.

2. Conduct company searches on the companies from the search results in 1 above.

3. Where a company search shows a corporate shareholder, conduct further company searches to find out the ultimate individual shareholder, where possible.

4. If there are shareholders with the same address or family name in the searches, dig further. They may have indirect interest in each other’s shareholding.

5. Ask the Relevant Persons whether they hold any indirect equity interest. Go through sections 8 and 59 of the Companies Act 2016 with them.


This post was first posted on Linkedin on 29 September 2021.

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