G E T T I N G Initial Public T H E D E A L T H R O U G Offerings H I n it ia l P Contributing editors u b lic Joshua Ford Bonnie and Kevin P Kennedy O ff e r in g s 2 0 1 7 2017 Law Business Research © Law Business Research 2016 Initial Public Offerings 2017 Contributing editors Joshua Ford Bonnie and Kevin P Kennedy Simpson Thacher & Bartlett LLP Publisher The information provided in this publication is Law Gideon Roberton general and may not apply in a specific situation. Business [email protected] Legal advice should always be sought before taking Research any legal action based on the information provided. Subscriptions This information is not intended to create, nor does Sophie Pallier Published by receipt of it constitute, a lawyer–client relationship. [email protected] Law Business Research Ltd The publishers and authors accept no responsibility 87 Lancaster Road for any acts or omissions contained herein. Although Senior business development managers London, W11 1QQ, UK the information provided is accurate as of July 2016, Alan Lee Tel: +44 20 3708 4199 be advised that this is a developing area. [email protected] Fax: +44 20 7229 6910 Adam Sargent © Law Business Research Ltd 2016 Printed and distributed by [email protected] No photocopying without a CLA licence. Encompass Print Solutions First published 2015 Tel: 0844 2480 112 Dan White Second edition [email protected] ISSN 2059-5484 © Law Business Research 2016 CONTENTS Global overview 5 Japan 51 Joshua Ford Bonnie and Kevin P Kennedy Kohei Koikawa and Masashi Ueda Simpson Thacher & Bartlett LLP Nishimura & Asahi Australia 6 Korea 55 John Williamson-Noble and Tim Gordon Chang Hyeon Ko Gilbert + Tobin Kim & Chang Belgium 11 Luxembourg 59 Arnaud Coibion, Gilles Nejman, Thierry L’Homme, François Warken and Laurent Schummer Filip Lecoutre and Xavier Taton Arendt & Medernach SA Linklaters LLP Mexico 64 Cayman Islands 15 Maurice Berkman Baksht, Guillermo Pérez-Santiago, Rolf Lindsay, Barnaby Gowrie and Andrew Barker José Alejandro Cortés Serrano and María de los Ángeles Walkers Padilla Zubiría Galicia Abogados S China 20 Jeffrey Ding and Toby Li Singapore 69 Fangda Partners Loo Choon Chiaw, Yau Khai Ling and Gerald Cheong Loo & Partners LLP France 23 Olivier Saba and Jean-Damien Boulanger Switzerland 74 Bredin Prat AARPI Philippe A Weber and Christina Del Vecchio Niederer Kraft & Frey Ltd Germany 28 Herbert Harrer and Alexander Schlee Taiwan 83 Linklaters LLP Lihuei (Grace) Mao Lee and Li, Attorneys-at-Law Hong Kong 32 Celia Lam and Christopher Wong Turkey 87 Simpson Thacher & Bartlett LLP Ömer Çollak and Ökkeş Şahan Paksoy Indonesia 37 Pheo M Hutabarat and Rosna Chung United Kingdom 91 Hutabarat, Halim & Rekan Clare Gaskell, Deborah Harris, Lucy Gillett and Rebecca Jack Simpson Thacher & Bartlett LLP Ireland 41 Lee Murphy and Niamh Rouse United States 97 Eversheds Joshua Ford Bonnie and Kevin P Kennedy Simpson Thacher & Bartlett LLP Italy 46 Nicola Brunetti, Emanuela Ciaffi and Maria Diletta Camicia Gattai, Minoli, Agostinelli & Partners 2 Getting the Deal Through – Initial Public Offerings 2017 © Law Business Research 2016 PREFACE Preface Initial Public Offerings 2017 Second edition Getting the Deal Through is delighted to publish the second edition of Initial Public Offerings, which is available in print, as an e-book and online at www.gettingthedealthrough.com. Getting the Deal Through provides international expert analysis in key areas of law, practice and regulation for corporate counsel, cross-border legal practitioners, and company directors and officers. Throughout this edition, and following the unique Getting the Deal Through format, the same key questions are answered by leading practitioners in each of the jurisdictions featured. Our coverage this year includes Belgium, the Cayman Islands, Ireland and Turkey. Getting the Deal Through titles are published annually in print. Please ensure you are referring to the latest edition or to the online version at www.gettingthedealthrough.com. Every effort has been made to cover all matters of concern to readers. However, specific legal advice should always be sought from experienced local advisers. Getting the Deal Through gratefully acknowledges the efforts of all the contributors to this volume, who were chosen for their recognised expertise. We also extend special thanks to the contributing editors, Joshua Ford Bonnie and Kevin P Kennedy of Simpson Thacher & Bartlett LLP, for their continued assistance with this volume. London July 2016 www.gettingthedealthrough.com 3 © Law Business Research 2016 Simpson Thacher & Bartlett LLP GLOBAL OVERVIEW Global overview Joshua Ford Bonnie and Kevin P Kennedy Simpson Thacher & Bartlett LLP According to a study by Ernst & Young LLP, 2015 saw US$195.5 billion in of companies sit in the IPO pipeline. In Japan, the Tokyo Stock Exchange IPO proceeds raised globally in 1,218 transactions, a decrease from 2014 of Main Market hosted 23 IPOs raising an aggregate of more than US$14 25 per cent and 2 per cent, respectively. Even excluding the record-setting billion, including two of the highest grossing IPOs of 2015 – Japan Post US$25 billion IPO of Alibaba Group Holding Ltd in 2014 on the New York Holdings Co, Ltd (US$5.7 billion) and Japan Post Bank Co, Ltd (US$5 bil- Stock Exchange (NYSE), global IPO proceeds were down 17 per cent in lion). The Australian IPO market in 2015 saw more deal volume than 2014 2015 as compared to 2014. but IPO proceeds declined by 71 per cent. In the United States, 2015 was much more measured compared to a Europe had a healthy year in the IPO market, particularly towards banner year in 2014 when US IPO activity was the highest since 2000. the end of 2015. According to Renaissance Capital, Europe came in sec- According to Ernst & Young LLP, 173 companies conducted IPOs on US ond in IPO activity during 2015, representing 35.5 per cent of global IPO exchanges, including 31 non-US companies that raised more than 80 per proceeds. In London, there were 92 IPOs on the London Stock Exchange cent of the aggregate proceeds derived from cross-border IPOs during the (LSE) in 2015 raising a total of approximately £11.9 billion according to year, and the NYSE ranked second in the world in 2015 based on IPO gross PricewaterhouseCoopers, although this was a decline from 138 IPOs rais- proceeds while the NASDAQ ranked first in the world based on number ing a total of £16.9 billion in 2014, which had been a seven-year high. In of transactions. According to Renaissance Capital, IPOs on the NYSE and Amsterdam, 2015 saw the $3.6 billion IPO on the Euronext of ABN Amro. NASDAQ collectively represented more than 17 per cent of global IPO In Germany, 13 German companies and two foreign companies completed activity in 2015, as measured by gross proceeds raised in IPOs with a deal IPOs on the regulated market of the Frankfurt Stock Exchange, marking size of at least US$100 million. the most successful year for IPOs since 2007. In Asia, 117 companies newly listed on the Hong Kong Stock Exchange In Latin America, IPO activity remained muted during 2015, with only in 2015, including 33 IPOs with a deal size of at least US$100 million that one IPO completed in Brazil during the year, for example. A number of raised nearly US$29 billion of gross offering proceeds – more than any countries in the region are, however, implementing regulatory reforms that exchange in the world. On the Chinese mainland, the flow of IPOs fluc- could bolster future new issuances. tuated dramatically during the course of 2015 as the Chinese IPO market The editors are pleased to be associated with some of the finest legal was open for only seven months. In December 2015, the Chinese Securities counsel in each of the countries covered in this volume and hope that you Regulatory Commission lifted suspensions on new listings where hundreds find the chapters relevant and useful. www.gettingthedealthrough.com 5 © Law Business Research 2016 AUSTRALIA Gilbert + Tobin Australia John Williamson-Noble and Tim Gordon Gilbert + Tobin Market overview empowers certain persons to apply to a court to seek orders enforcing the Rules. 1 What is the size of the market for initial public offerings The continuous disclosure regime established under the Listing Rules (IPOs) in your jurisdiction? is a key obligation of companies listed on the ASX. Once listed, a company In 2015, there were 97 IPOs with a total market capitalisation of A$17.6 bil- must notify ASX immediately of any information that a reasonable person lion and more than A$8.6 billion in capital raised. Although the total num- may expect to have a material effect on the price or value of the company’s ber of IPOs increased by 33 per cent compared to 2014, the total market securities (subject to certain limited exemptions). capitalisation decreased by 32 per cent on the previous year. The biggest listing for 2015 was Link Group, backed by Private Equity Partners and 5 Must issuers seek authorisation for a listing? What co-owners ICG and Macquarie. The IPO market is expected to continue information must issuers provide to the listing authority and to perform strongly in 2016 and onwards, with the trend of private equity how is it assessed? backed IPOs likely to continue. A company seeking general admission must satisfy certain criteria before it can be listed on the ASX. This involves: 2 Who are the issuers in the IPO market? Do domestic • satisfying a profits or assets test; companies tend to list at home or overseas? Do overseas • submitting a successful application to ASX for permission for quota- companies list in your market? tion of all securities in the main class of the company’s securities (gen- Issuers are typically domestic entities that are issuing securities for the pur- erally ordinary shares); pose of financing their operations. Australian companies tend to list on the • providing a constitution that is consistent with the Listing Rules as well ASX, but may also list overseas. This is called cross-listing, and issuers will as the law governing corporations in the jurisdiction of the company’s typically cross-list for the purposes of business expansion, access to greater incorporation or registration; pools of capital and increased public exposure. • adopting an appropriate structure and operations having regard to the Overseas companies are eligible to list on the ASX, and are subject to Listing Rules; admission requirements specific to foreign issuers (see questions 14 and • complying with the Listing Rules; 15). • appointing directors of good reputation and character, to be satisfied by obtaining criminal history, personal insolvency searches and statu- 3 What are the primary exchanges for IPOs? How do they tory declarations to that effect; differ? • issuing a prospectus that is lodged with ASIC; The ASX is Australia’s primary securities exchange for IPOs. The ASX has • having an issue price per share of at least A$0.20; the highest profile and volume of capital in Australia. There are a number • meeting the ‘minimum shareholding spread’ requirement – the few- of additional securities exchanges including the National Stock Exchange est permitted shareholders being 300, each holding a parcel of shares of Australia (NSX), Sydney Stock Exchange (SSX, formerly Asia Pacific with a value of at least A$2,000 and with 50 per cent or more hold- Exchange) and Chi-X Australia. ers of the main class of shares not classifying as ‘related parties’ of the The NSX is a stock exchange that caters for smaller to medium-sized company; and entities. The market cap of the NSX is approximately A$2 billion. Chi-X • disclosing in the prospectus if the company will not comply with the Australia launched an alternative trading platform in October 2011. The ASX Corporate Governance Council’s best practice recommendations. Asia Pacific Exchange began operating in late 2013, with its first listings in March 2014. In November 2015, the Asia Pacific Exchange changed its 6 What information must be made available to prospective name to the Sydney Stock Exchange (SSX). investors and how must it be presented? The company must issue a prospectus (or, with ASX’s agreement, an infor- Regulation mation memorandum if the company is undertaking a compliance listing without raising capital) before it can be listed on the ASX. 4 Which bodies are responsible for rulemaking and enforcing When an offer of new securities is made to Australian retail investors, the rules on IPOs? a prospectus must accompany the issue. In order to gain and maintain a listing on the ASX, a company must com- The Corporations Act has both general and specific disclosure require- ply with ASX’s Listing Rules (the Listing Rules). The obligations imposed ments. The general requirement is that a prospectus must contain all the by the Listing Rules are additional to the company’s obligations to com- information in relation to the company that investors and their profes- ply with the Corporations Act 2001 (Cth) (the Corporations Act). ASX has sional advisers would reasonably require to make an informed assessment absolute discretion in determining whether a listing application is accepted of (broadly) the rights and liabilities attaching to the securities offered; and or rejected. the assets and liabilities, financial position and performance, profits and The securities laws of Australia (the Corporations Act and the losses and prospects of the company, to the extent to which it is reasonable Australian Securities and Investments Commission Act 2001 (Cth) (the for investors and their professional advisers to expect to find that informa- ASIC Act)) recognise the importance of compliance with the Listing Rules, tion in the prospectus. Disclosure will only need to be made if the com- Operating Rules, ASIC/ASX Market Integrity Rules, Clear Operating Rules pany, its directors and proposed directors (if any), underwriters or advisers and Settlement Operating Rules (together, the Rules), and the Australian (including people named in the prospectus) actually know the information Securities and Investment Commission (ASIC) monitors compliance with or (in the circumstances) ought reasonably to have obtained the informa- these rules. The Corporations Act requires that the Rules be observed and tion by making enquiries. The prospectus must be worded and presented in 6 Getting the Deal Through – Initial Public Offerings 2017 © Law Business Research 2016 Gilbert + Tobin AUSTRALIA a clear, concise and effective manner (ASIC Regulatory Guide 228 sets out Usually the threat of suspension or termination will be enough to make ASIC’s view on how issuers can satisfy this requirement). a listed entity cooperate with the ASX. However, if a listed entity refuses to Prospectuses must be lodged with ASIC; however, it is not mandatory cooperate, aside from suspension or termination, the ASX’s only remedy for ASIC to pre-vet a prospectus. The company may distribute a prospectus will be to take legal action against the entity to require it to comply with its immediately after lodgement, but must not accept an application for issue obligations under the Listing Rules. or transfer of securities offered under the disclosure document until seven If the ASX suspects that a listed entity has committed a significant con- days after lodgement (or for up to 14 days, if extended by ASIC). This is travention of the Listing Rules, or that a listed entity or other person (such known as the ‘exposure period’. as a director, secretary or other officer of a listed entity) has committed a A prospectus (or other disclosure document) may be required for sec- significant contravention of the Corporations Act, it is required to give a ondary sales of previously issued securities in some circumstances. The notice to ASIC with details of the contravention. The purpose of the notice ‘on-sale’ provisions contained in the Corporations Act (which impose this is so that ASIC can then consider whether it wishes to take criminal or other disclosure requirement) are intended to prevent companies or sellers from regulatory action in relation to the breach. avoiding the prospectus requirements by issuing or selling their shares The ASX’s sanctions are limited in that it cannot conduct searches, to sophisticated and professional investors only (who do not ordinarily seize evidence or examine people in the way that ASIC and other gov- require a disclosure document) only for those purchasers to ‘on-sell’ those ernment regulators can. Its ability to investigate is limited to its power shares to retail investors. under the Listing Rules to request information from a listed entity men- tioned above. 7 What restrictions on publicity and marketing apply during the IPO process? Timetable and costs Marketing to retail investors is not permitted before lodging the prospectus 9 Describe the timetable of a typical IPO and stock exchange with ASIC and there are restrictive provisions in the Corporations Act that listing in your jurisdiction. constrain pre-prospectus advertising more generally. Generally, a reasonably simple IPO can be completed in three to four Certain types of marketing to institutional and other sophisticated months under the following indicative timetable. investors is permitted before lodgement of the prospectus. In the first week, an IPO advisory team and due diligence committee This marketing may include: (DDC) is appointed, corporate restructuring steps are considered, and dis- cussions are commenced to determine initial pricing and capital structure. Research reports Where the company is registered as a proprietary company, steps for con- Affiliates of the lead manager or underwriter or other members of the version to a public company are commenced. underwriting syndicate may publish research reports about the company. In the second week, the due diligence process, which includes the These reports may be circulated to institutional investors on a stringently first DDC meeting, usually commences. Where required, applications are monitored basis before the offering. They are intended to provide infor- made to ASIC and the ASX for modifications of the Corporations Act or mation about the company and its business and must not refer to the IPO. waivers of the Listing Rules. Work to prepare the prospectus financials is commenced. Pre-marketing Between weeks three and eight, the due diligence process continues. Sales people of the lead manager or underwriter may contact a number of Independent directors are appointed and any employee incentive schemes, institutional investors to familiarise themselves with market perception of dividend reinvestment plans or set dividend policies are determined. In the company, to generate investor interest and identify concerns that will addition, presentations are given to research analysts and research reports need to be addressed by the management roadshow. are prepared. The prospectus is finalised and verified, and due diligence sign-offs are obtained. Roadshows In week nine, further pricing discussions are held. The board must The lead manager or underwriter can organise a series of meetings with also approve the pathfinder prospectus for distribution to sophisticated institutional investors to ascertain the level of investor demand for the IPO. investors and the underwriting agreement, and the institutional roadshow will commence. General public In week 12, the institutional bookbuild is conducted and the under- The publicity campaign to investors can begin once the prospectus is writing agreement is signed. The prospectus is lodged with ASIC and the lodged, subject to certain restrictions. Generally speaking, mass media listing application is lodged with the ASX. After the ASIC exposure period, advertising is rare, other than in larger IPOs which include an offer to the the retail offer commences. general public. More frequently, retail investors are solicited by brokers In week 17, the funds are available to the company, which will then from their retail distribution networks. issue the shares. 8 What sanctions can public enforcers impose for breach of IPO 10 What are the usual costs and fees for conducting an IPO? rules? On whom? The costs of conducting an IPO include the appointment of advisers and Under its listing agreement with ASX, each entity admitted to the ASX offi- experts such as lawyers, corporate advisers, underwriters and accountants. cial list is contractually bound to comply with the Listing Rules, which is Other fees include ASX, legal, accounting, experts, registry and printing given the force of law under the Corporations Act. fees, and vary depending on the size and complexity of the company and If ASX finds that a listed entity has breached the Listing Rules, ASX can its business and the extent of pre-IPO restructuring work required. Larger require the entity to take corrective action. The type of corrective action IPOs can involve fees well in excess of A$1 million. ASX will usually require will depend on the nature of the breach. For exam- The ASX charges various fees, including: ple, if it is a disclosure breach, ASX may require the entity to make a correc- tive announcement to the market. If it is a failure to obtain security holder ‘In principle’ decisions fee approval for acquiring a substantial asset from, or disposing of a substan- If there is an aspect of the application upon which the company requests tial asset to, a person in a position of influence, ASX may require the entity the formal advice of the ASX before submitting the application (such as to cancel the transaction unless security holder approval is obtained. an unusual structure or requirement for significant waivers), a minimum It should be noted that the Listing Rules are not law, as such, and the fee of A$7,500 must be paid to the ASX. However, this amount may offset ASX cannot fine or impose any other criminal or civil penalties on a listed against the initial listing fee. entity for breaching the Listing Rules. If a listed entity refuses to comply with its obligations under the Listing Rules, the ASX’s ultimate sanction Initial listing fee is to suspend trading in its securities or, in an extreme case, to terminate This fee is payable upon application and is based on the value of the securi- its listing. This is not a sanction that the ASX exercises lightly, since it can ties for which quotation is sought. Fees range from A$25,000 (up to A$3 have a significant impact on investors, by taking away their ability to buy or million value) to over A$400,000 (over A$1 billion value). sell securities in the entity on the ASX. www.gettingthedealthrough.com 7 © Law Business Research 2016 AUSTRALIA Gilbert + Tobin Annual listing fee potential fundraisers from making offers to the retail market at large with- Annual listing fees are paid in advance for each year and range from out a disclosure document. A$10,000 to a maximum of A$350,000. 13 What types of anti-takeover devices are typically Other administrative fees implemented by IPO issuers in your jurisdiction? Are there There can be additional fees charged for, for example, reviews of docu- generally applicable rules relevant to takeovers that are ments, applications for waivers and other matters, generally levied at relevant? A$300 per hour (if over 10 hours fare required for the ASX to process). The ability to use anti-takeover devices is restricted in a number of ways There are also fees payable monthly for transactions processed by the due to the operation of directors’ common law and statutory duties as well Clearing House Electronic Sub-register System (CHESS), including the as the Corporations Act and Listing Rules restrictions on actions that can be production of CHESS holding statements. An annual CHESS operating fee taken in the context of a takeover bid. It is the preference of ASIC and the equal to 10 per cent of an entity’s annual listing fee is also payable by the Takeovers’ Panel that shareholders have the opportunity to consider a bid company (minimum A$1,500). and actions that may have the consequence of removing that opportunity will be viewed in that light. Some devices that can be implemented by IPO Corporate governance issues include: 11 What corporate governance requirements are typical or required of issuers conducting an IPO and obtaining a stock Issuance of shares exchange listing in your jurisdiction? The issuance of shares through the IPO in accordance with the Listing Rules to ‘friendly’ parties such as to employees through employee share The company will need to review its board size and composition and its plans or through a placement to ‘friendly’ investors will typically mitigate corporate governance arrangements in connection with the IPO to ensure takeover bids. they are appropriate for an ASX listed company of the size and nature of the company. Crown jewel defence The ASX Corporate Governance Council has published the ASX The company may deal with a significant asset post-takeover in such a way Recommendations for Australian listed entities in order to promote inves- that makes the company as a whole less attractive to a bidder. An example tor confidence and to assist companies in meeting stakeholder expecta- would be if a joint venture partner to a significant asset has the right to buy tions. The ASX Recommendations are not prescriptions, but guidelines. out the asset at pre-agreed terms if a takeover bid is implemented, thereby However, under the Listing Rules, the company will be required to disclose depriving the bidder of the benefit of that asset. This strategy is very difficult the extent to which it has followed the ASX Recommendations and where it to implement after receipt of a bid in light of the prevailing directors’ duties. does not follow a recommendation, it must give reasons for not following it. Some of the relevant ASX Recommendations are: Poison pill Implementing change of control provisions in major contracts, which leads Board independence to uncertainty on the bidder’s part as to the value of the target post-bid, may One of the ASX Recommendations is that the board comprise a majority mitigate takeover bids. of independent directors and have a chair who is an independent director. It can take time to identify suitable board nominees where additions are Foreign issuers required to meet this recommendation. 14 What are the main considerations for foreign issuers looking Board committees to list in your jurisdiction? Are there special requirements for Some ASX Recommendations are binding. An entity that will be included foreign issuer IPOs? in the S&P All Ordinaries Index on admission must have an audit commit- The three categories of ASX listing available to foreign entities include: tee. If it will be in the S&P/ASX300 it must also: • a foreign exempt listing; • comply with the ASX Recommendations in relation to the composi- • a standard ASX listing; and tion, operation and responsibility of the audit committee (at least three • an ASX debt listing. members, all non-executive directors and a majority who are inde- pendent directors); and Foreign companies may seek admission under a ‘foreign exempt’ listing. • have a remuneration committee comprising solely of non-execu- To encourage foreign listed entities to undertake a secondary listing such tive directors. entities are exempted from a number of the Listing Rule requirements that would apply if its primary listing was with the ASX. The company must sat- In addition, the ASX recommends that each board have a nomina- isfy the ASX that it meets the conditions specified in Listing Rule 1.11 and tions committee. must complete the ASX Foreign Exempt Listing application and agreement comprised in Appendix 1C. For example, such companies must be, among Securities trading policy is mandatory other things, a foreign entity listed on an overseas exchange which is a All ASX listed companies must have in place a securities trading policy member of the World Federation of Exchanges. However, a foreign entity which discloses the ‘closed periods’ for trading in the company’s securities may instead elect to seek general admission to the official list by adhering and related matters. to the same admission requirements that apply to an Australian entity. ASX Guidance Note 4 — ‘Foreign Entities Listing on ASX’ provides a comparison Other recommended corporate governance policies of the differences between the two forms of listing as they would affect a It can also take time to develop other corporate governance policies that are foreign entity. recommended by the ASX. These include: Some of the requirements that apply to foreign companies listing on • diversity policy (including gender diversity objectives); the ASX are as follows. • code of conduct for officers and employees; and • the company must be registered as a foreign company in Australia; • continuous disclosure policy (including developing the company’s • the offer document must clearly state that the company is not estab- internal arrangements to enable it to meet its continuous disclo- lished in Australia and that its activities (apart from offering of secu- sure obligations). rities in Australia) are not regulated by the Corporations Act, the Commonwealth of Australia or by ASIC; 12 Are there special allowances for certain types of new issuers? • the offer document must contain a summary of the rights and obli- A disclosure document is not required if a person makes personal offers of gations of security holders under the law of the company’s home securities that result in securities being issued or transferred to 20 or fewer jurisdiction, and the regulations and restrictions that apply to the persons, with no more than A$2 million being raised in any rolling 12-month listed securities; period. This exemption assists to accommodate small to medium-sized • the offer document must contain a summary of substantial holdings enterprise fundraising involving only a limited investment and a limited disclosure and takeovers are regulated under the law of the company’s number of investors. The exemption is limited to personal offers to prevent home jurisdiction; 8 Getting the Deal Through – Initial Public Offerings 2017 © Law Business Research 2016 Gilbert + Tobin AUSTRALIA • the offer document must contain specific details relating to the com- pany’s accounting practices, including: Update and trends • how the financials in the offer document were prepared; The landscape of listed Australian companies is shifting. Investor • what accounting standards the company will apply after it is listed interest in the energy and resources sector is very limited, while and, if not the Australian Accounting standards, the standards the healthcare, retail and technology sectors continue to perform that will be used (and whether ASX has approved this use); and strongly. The composition of ASX’s list – which is considerably more • similarly detailed information in respect of the company’s audit- varied and diverse than in previous years – is reflective of the shift in ing practices. investor preferences away from energy and resources, and this trend is expected to continue in the near future. 15 Where a foreign issuer is conducting an IPO outside your The IPO market continues to resist total selldowns by major jurisdiction but not conducting a public offering within your shareholders. IPOs in which major shareholders have sold all of their jurisdiction, are there exemptions available to permit sales to shares have been rare. To compensate, the contractual restrictions on major shareholders disposing of shares post-IPO have become investors within your jurisdiction? more shareholder-friendly, incorporating aggressive performance Australia has a ‘mutual recognition’ scheme with New Zealand that per- hurdle-based release mechanisms that allow restricted shareholders mits the offering of securities that are made under a New Zealand law to sell their remaining shares if the share price performs well against compliant prospectus and investment statement to be extended to retail the share price at listing. investors in Australia without the need for an Australian prospectus or product disclosure statement (see ASIC Regulatory Guide 190). Generally, foreign companies offering securities in Australia will have The purchasers to comply with Australian disclosure requirements if they intend to sell Generally, the tax implications for purchasers should be outlined within securities to Australian investors. However, a foreign company may apply the prospectus. This includes any material historical tax exposure in the for relief from this requirement in limited circumstances where the for- listing group. With regard to stamp duty, there is typically no share transfer eign issuer has complied with a foreign disclosure regime that is similar to duty imposed on a purchaser as a result of an IPO, however in some cir- Australia’s prospectus requirements, and the offer of securities is made to cumstances where this does not apply, regard will need to be given to ‘land a limited number of Australians. Relief is granted on a case-by-case basis. rich’ or landholder duty. Finally, GST and income tax associated with listing can be signifi- Tax cant. The GST recoverability and income tax deductibility of transaction costs is often a complex matter, and can be influenced by the IPO struc- 16 Are there any unique tax issues that are relevant to IPOs in ture adopted. your jurisdiction? There are tax issues relevant to several parties in relation to IPOs: Investor claims 17 In which fora can IPO investors seek redress? Is non-judicial The company resolution of complaints a possibility? The company should examine relevant documentation that supports the material positions taken by the company (eg, copies of tax advice received) Investors in an IPO can lodge complaints with ASIC. ASIC has a broad and whether tax issues recommended have been adequately addressed. range of enforcement powers in relation to contraventions of the The company should consider the projected franked dividends available Corporations Act (see question 19). These enforcement powers include after listing and examine any carried forward losses. The company should administrative action, civil litigation or referring a matter to the Director also examine its pre-sale structure and any tax consolidation implications. of Public Prosecutions (DPP) for prosecution. The vendors 18 Are class actions possible in IPO-related claims? Current shareholders who are Australian resident taxpayers will be taxable Yes. Class actions are possible in Australia and are typically commenced at their marginal rates on all gains. In the case of gains on capital account, under Part IVA of the Federal Court of Australia Act 1976 (Cth) or the equiv- there is a capital gains tax (CGT) discount available where the shares have alent legislation in the Supreme Courts of Victoria and New South Wales. been held for 12 months. If vendors maintain their shareholding after list- In order to bring a class action, at least seven persons must have claims ing, there is the availability of rollover relief to defer tax liabilities. Other against the same person or entity, these claims must relate to the same, international tax matters may be relevant to the Australian tax implications similar or related circumstances, and the claims must give rise to a substan- of an IPO exit, including: tial common issue of law or fact. • the residency of entities within the structure; The unrestrictive and plaintiff-friendly nature of these threshold • the availability of treaty protection for non-resident investors; requirements means that class actions are possible in IPO-related claims. • the availability of foreign shareholder CGT exemptions; and • any ‘aggressive’ tax positions adopted. John Williamson-Noble [email protected] Tim Gordon [email protected] L35, Tower Two, International Towers Sydney Tel: +61 2 9263 4000 200 Barangaroo Avenue Fax: +61 2 9263 4111 Barangaroo, NSW 2000 www.gtlaw.com.au Australia www.gettingthedealthrough.com 9 © Law Business Research 2016 AUSTRALIA Gilbert + Tobin 19 What are the causes of action? Whom can investors sue? And • the person making the offer; what remedies may investors seek? • each director of the body making the offer if the offer is made by The causes of action underlying most of the Australian shareholder class a body; actions in relation to an IPO are misleading or deceptive conduct in respect • a person named in the disclosure document with their consent as a of inaccurate or incomplete statements or a failure to disclose or correct proposed director of the body whose securities are being offered; or certain information. • an underwriter (but not a sub-underwriter) to the issue or sale named Subsection 728(1) of the Corporations Act states that a person must in the disclosure document with their consent, in each case where the not offer securities under a disclosure document if there is a misleading or loss or damage is caused by any contravention of subsection 728(1) in deceptive statement in: relation to the disclosure document. • the disclosure document; • any application form that accompanies the disclosure document; Furthermore, an investor may recover the amount of the loss or damage • any document that contains the offer if the offer is not in the disclosure from a person named in the disclosure document with their consent as document or the application form; having made a statement that is included in the disclosure document or • an omission from the disclosure document of material; or on which a statement made in the disclosure document is based, where the • a new circumstance has arisen since the lodgement of the disclosure loss or damage is caused by the inclusion of that statement in the disclo- document that is required to have been included. sure document. Lastly, an investor may recover the amount of the loss or damage from Under section 729 of the Corporations Act, an investor who suffers loss or a person who contravenes, or is involved in the contravention of subsection damage because an offer of securities under a disclosure document was 728(1) where the loss or damage is caused by that contravention. made under a misleading or deceptive statement may recover the amount of the loss or damage from: 10 Getting the Deal Through – Initial Public Offerings 2017 © Law Business Research 2016