IPO: Prospectus disclosure

Equity capital markets (ECM)

Today’s post is about disclosure in prospectus for IPO.

It is almost inevitable that advisers would discover some non-compliance relating to the companies undertaking IPO exercises or their subsidiaries in the course of due diligence.

In addition to rectifying the non-compliance, consideration should also be given as to whether the non-compliance need to be disclosed in the prospectus.

In deciding whether to disclose the non-compliance in the prospectus, the considerations to be taken into account should include but not limited to the following:

1. Whether the non-compliance relate to any information which is required to be disclosed pursuant to the Prospectus Guidelines.

For example, paragraph 5.02(j) of the Prospectus Guidelines prescribes information that must be disclosed in prospectus in the event of non-compliance of any relevant laws, regulations, rules or requirements governing the conduct of the group’s business and environmental issue which may 𝐦𝐚𝐭𝐞𝐫𝐢𝐚𝐥𝐥𝐲 affect the group’s business or operations.

2. The general duty of disclosure in prospectus under section 236 of the Capital Markets and Services Act 2007.

Whether the non-compliance is information that investors and their professional advisers would reasonably require, and reasonably expect to find in the prospectus, for the purpose of making an informed assessment of:

• the assets and liabilities, financial position, profits and losses and prospects of the issuer;
• the rights attaching to the securities;
• the merits of investing in the securities and the extent of the risk involved in doing so.

Please refer to the details in section 236 of the CMSA.

3. Whether the non-compliance meets the qualitative or quantitative materiality thresholds as agreed amongst members of the due diligence working group for the IPO (as set out in the due diligence planning memorandum).

The above is not exhaustive.

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This post was first posted on Linkedin on 6 September 2021.

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