Capdesk Insights: Fladgate LLP Explain IPOs (3)

If you run a growing, dynamic company you may be considering an initial public offering (more commonly known as an “IPO” or a “listing”) for your company i.e. floating your company on the stock market. This is the last of a three part series about IPOs.

The first summarises the advantages and disadvantages of doing an IPO. The second outlines which of the several UK markets you could consider. The current part is perhaps the most important, as it gives some guidance about what you should be aware of before you start.



      1. Due Diligence and Verification

Any nomad or broker that backs an IPO or finds potential investors will want comfort that the information given to potential investors is correct.

It is therefore market practice for extensive due diligence reports to be prepared for the company and the nomad/broker by the company’s lawyers and accountants providing details of the company’s business, assets, contracts and finances.

The same or similar information will also be used to compile a record of the steps taken to verify and confirm the accuracy of statements and figures included in the prospectus/admission document.

Directors of companies preparing to carry out an IPO should be aware that they may have to devote a significant amount of management time to this process during the lead up to the IPO.

      2. Public Disclosure/Reporting

Being a director of publicly quoted company requires a different mind-set from being a director of an unquoted company.

This follows from the principle of a “level playing field”: all investors and proposed investors in a company should have access to the same company information. If one participant in the market has more information about a company than another participant in the market then he has an unfair advantage.

There are therefore a number of rules and regulations which require “inside information” to be announced as soon as possible.  “Inside information” is information of a precise nature, which has not been made public, relating to a company and which, if it were made public, would be likely to have a significant effect on the price of shares in that company.

The requirement to make such announcements might initially seem strange to directors of a private company.

      3. Additional Duties/Restrictions

Directors will be subject to certain duties and restrictions.

For example, they are only permitted to buy and sell shares in the company at specific times (i.e. when they are not deemed to have any inside information) and their remuneration packages will be subject to scrutiny by the shareholders of the company.

      4. Personal Liability

A director or proposed director is required by law to take personal responsibility for statements made in the prospectus/admission document.

In addition, a broker/nomad may require a director or proposed director to give personal warranties in an agreement with them to find potential investors for the company.


There is a defence against any claim about statements made in the prospectus/admission document if the director concerned took reasonable steps to ensure the accuracy of statements made. The detailed verification process referred to above will usually be proof of such reasonable steps being taken.

It is also usual to include limits (both as to amount and time) in a placing agreement on a director’s liability for warranties that he given to the broker/nomad.


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Fladgate is an advanced, commercially astute international law firm serving a wide range of corporate, institutional, and private clients.  

We are experts in assisting companies in raising new equity, either through admission to the London Stock Exchange’s (LSE) Main Market, the AIM Market (AIM) or through a dual quotation if the company is already listed overseas.

With a significant proportion of our clients being fast-growing and entrepreneurial businesses, we have developed wide-ranging experience of AIM and are regularly ranked by the independent legal directories as one of the leading law firms for AIM-related matters. We act for both domestic and overseas companies, as well as for nominated advisers and brokers on a range of flotations, reverse takeovers and secondary fundraisings across multiple sectors.

“Fladgate is increasingly regarded as a draw for AIM flotations and related transactions…with a wealth of experience to offer domestic and international clients.”

                                                                                                                            - Chambers UK

Nigel Gordon
Nigel Gordon

Partner at Fladgate - +44 (0)20 3036 7389; +44 (0)7917 834 195;