Red flag in IPO-conflict of interest

Equity capital markets (ECM)

It is usually a red flag to investigate further for conflict of interest in an IPO exercise if any interested person of the company undertaking the IPO exercise (“applicant”) has business interest outside the applicant and its subsidiary companies.

In determining whether a COI situation arises, the applicant should consider the following:

1. Whether interested persons of the applicant or its subsidiary companies have personal pecuniary interests which are in conflict with those of the applicant or its subsidiary companies;

2. Whether the relationship between a major shareholder and the applicant or its subsidiary companies could result in a conflict between the applicant’s obligations towards that major shareholder and its duties to the general body of shareholders;

3. Whether the professional judgment of interested persons to act in the best interests of the applicant or its subsidiary companies is compromised;

4. Whether interested persons are otherwise engaged in an activity which detracts time and commitment from managing the applicant or its subsidiary companies; and

5. Whether the conflict is significant in relation to the nature, scale and complexity of the businesses of the applicant or its subsidiary companies.

Interested persons” include directors, major shareholders and chief executive.



This post was first posted on Linkedin on 15 September 2021.

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