Legal Entity Management Software for UK IPOs

Kerie Kerstetter

If you're planning an initial public offering (IPO) in the UK, what do you need to consider? What preparation do you need to do, and what are the tools and solutions that could help smooth your path to a listing? Here, we explore all the aspects of pre-IPO planning for UK companies.  

What is an IPO?

Defined by IG, an IPO 'is the first sale of stock issued by a company. In other words, it's when a business decides to start selling its shares to the public.'

Once the company decides how many shares it wants to offer, an investment bank is responsible for suggesting an initial price for the stocks based on predicted demand. The company then must follow certain mandated processes around preparing for and marketing their issue.  

The UK IPO Process

Deciding to go public demands a significant amount of work, even before you register for a listing. An audit considering all aspects of the business's finances should be undertaken prior to registration, to ensure that everything is in order.

Listing Rules, governed by the UK's Financial Conduct Authority, set out compulsory standards for any company wishing to register for its shares or securities to be made public. The rules cover issues like executive pay, compliance with the UK Corporate Governance Code and the mandatory information needed to be included in the IPO prospectus, among other things.

With a few exceptions, every company must prepare a prospectus when applying to trade its securities on a Regulated Market in the UK. A prospectus must be in the form prescribed by the FCA's Prospectus Rules and be approved by the FCA prior to its publication.

Securities must be admitted to trading by a recognized investment exchange ('RIE'), such as the London Stock Exchange.  

Preparing for a Listing in the UK

There are several stages when preparing to undertake a UK IPO:

1. Appoint professional advisers. Legal advisers; underwriting managers; brokers ' all will play a role in preparing you for your listing. They will confirm that your company is suitable for listing, and help you to gather the data you need to prepare your prospectus.

You will also need a sponsor ' typically an investment bank ' who will help you to prepare for listing, liaise with the FCA, prepare your prospectus, and underwrite and market your issue.

2. Submit an eligibility letter to the FCA, via your sponsor, along with a draft of your prospectus for the regulator's review and approval.

3. Carry out due diligence and a full legal review. Your prospectus will need to include comprehensive and accurate information on your company, as well as relevant legal information on your directors. The due diligence process underpins this, giving the reporting and data that investors will base their decisions on. The sponsor will usually carry out this due diligence, based on information provided by the company.

The company's legal advisers will then typically verify that the information to be contained in the prospectus is correct and complete. This includes financials, records of corporate governance policies and performance, and accurate information on corporate structure. The veracity of all this data is crucial; it's not surprising then that 'preparing for an IPO' is one of the recognized key drivers for senior leaders paying attention to entity data integrity. This can be a challenge if your corporate structure is complex, with numerous legal entities and subsidiaries.

4. Produce and publish your prospectus. This needs to include certain mandated information, including the company's financials, the reasons you're undertaking the IPO and details of the offer itself.

The Need for Impeccable Entity Management in a UK IPO

As we mentioned above, accurate entity data forms the bedrock of your prospectus and your proposed listing. Your sponsor needs assurance that you have full oversight of all the subsidiaries in your organization before you even commence planning for an IPO.

Once you start to prepare for your listing, this data is needed as the basis of your prospectus. It's essential that it's accurate, current and stands up to inspection ' which is why organizing your entity data pre-IPO is such a crucial step.

This becomes more complicated the more complex your corporate structure is; if you have numerous legal entities within your organization, it can be more challenging to manage your business and to evidence good management. Add to this the difficulties of collating data gathered via several different systems or manually and it becomes clear that gathering the compliance, financial and other corporate data you need for your prospectus can be a significant challenge.  

How Entity Management Software Can Help You Prepare for an IPO

Legal entity management software comes into its own here. The effective management of your legal entities is always important; when preparing for an IPO, this importance is amplified.

Supporting a public offering ' and once complete, running a public company ' demands a flawless approach to entity management. Entity management software makes efficient and effective entity management a reality, enabling you to centralize and manage data management across all your subsidiaries, no matter their locations.

If you're considering an IPO in the UK or elsewhere, it's imperative that you can evidence full control over your entities' financial, risk, compliance and governance performance, with clear documentation available on demand.

Diligent Entities is Diligent's market-leading entity management software. Diligent Entities enables businesses to easily access and share comprehensive entity data. As well as providing the foundation for your UK IPO due diligence and prospectus, you can rely on the data provided to help you manage a higher-profile public company. More robust, efficient and accessible entity management data can be a reality; to find out how, request a free demo on our website.

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Kerie Kerstetter
Kerie Kerstetter is a former Senior Director at Diligent and the Next Gen Board Leaders. She has done extensive work into how governance and ESG technologies empower leadership to make informed, data-driven decisions while mitigating cyber risk. Kerie was one of the founding members of Boardroom Resources, the premier educational resource for board members, acquired by Diligent in 2018.