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Initial Public Offerings 2020 Fourth Edition Contributing Editors: Ilir Mujalovic & Harald Halbhuber With contributions by: Global Legal Insights Initial Public Offerings 2020, Fourth Edition Contributing Editors: Ilir Mujalovic & Harald Halbhuber Published by Global Legal Group GLOBAL LEGAL INSIGHTS – INITIAL PUBLIC OFFERINGS 2020, FOURTH EDITION Contributing Editors Ilir Mujalovic & Harald Halbhuber, Shearman & Sterling LLP Head of Production Suzie Levy Senior Editor Sam Friend Sub Editor Megan Hylton Group Publisher Rory Smith Creative Director Fraser Allan We are extremely grateful for all contributions to this edition. Special thanks are reserved for Ilir Mujalovic & Harald Halbhuber of Shearman & Sterling LLP for all of their assistance. Published by Global Legal Group Ltd. 59 Tanner Street, London SE1 3PL, United Kingdom Tel: +44 207 367 0720 / URL: www.glgroup.co.uk Copyright © 2020 Global Legal Group Ltd. All rights reserved No photocopying ISBN 978-1-83918-047-7 ISSN 2399-9594 This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations. The information contained herein is accurate as of the date of publication. CONTENTS Preface Ilir Mujalovic & Harald Halbhuber, Shearman & Sterling LLP Foreword Aseel M. Rabie, Securities Industry and Financial Markets Association (SIFMA) 1 General chapter Going public in the USA: An overview of the regulatory framework and capital markets process for IPOs, Ilir Mujalovic, Harald Halbhuber & Ana Aur, Shearman & Sterling LLP 6 Country chapters Australia Daniel Scotti & Nicole Sloggett, MinterEllison 26 Brazil Daniela Anversa, Veirano Advogados 38 China Shiwei Zhang, Zhong Lun Law Firm 49 Cyprus Demetris Roti, Yiota Georgiou & Rafaella Michail, Elias Neocleous & Co LLC 58 Finland Maria Lehtimäki, Niko Markkanen & Emilia Saloranta, Waselius & Wist 66 France Hervé Letréguilly & Séverine de La Courtie, Shearman & Sterling LLP 75 Germany Dr. Martin Steinbach & Dr. Mauritz C. Mann, Ernst & Young 88 Greece Nikos E. Pimblis & Nikos O. Xenoyiannis, Papadimitriou – Pimblis & Partners 99 Hong Kong Angel Wong & David Zhang, ONC Lawyers 108 Hungary Márton Kovács, Áron Kanti & Bálint Juhász, HBK Partners Attorneys at Law 118 India Arka Mookerjee & Pracheta Bhattacharya, J. Sagar Associates 127 Indonesia Barli Darsyah, Indrawan Darsyah Santoso, Attorneys At Law 139 Italy Marco Lantelme, BSVA Studio Legale Associato 152 Japan Toshimitsu Nemoto, Suguru Miyata, Kengo Ozaki & Tetsuya Tamura, Mori Hamada & Matsumoto 165 Korea Joo Hyoung Jang, Jisoo Yoo & Ji Hyun Youn, Barun Law LLC 178 Morocco Kamal Habachi & Salima Bakouchi, Bakouchi & Habachi – HB Law Firm LLP 189 Portugal Eduardo Paulino, Margarida Torres Gama & Inês Magalhães Correia, Morais Leitão, Galvão Teles, Soares da Silva & Associados 200 Singapore Wee Woon Hong, Opal Lawyers LLC 212 Switzerland Dr. Alexander von Jeinsen & Annette Weber, Bär & Karrer Ltd. 223 United Kingdom Pawel J. Szaja & Michael Scargill, Shearman & Sterling (London) LLP 234 PREFACE e are pleased to present the fourth edition of Global Legal Insights – WInitial Public Offerings. An initial public offering is a key way for companies to raise capital in the global capital markets and list their shares for public trading. Although IPOs are conceptually similar whether made to investors in New York, London or Hong Kong, or in other long-established or newer markets around the world, the regulatory frameworks, market practices, investor communities and subsequent public-company obligations are far from homogenous across jurisdictions. The Initial Public Offerings book provides general counsels, investment bankers, lawyers, business professionals, the investing community and other advisers and interested parties with a detailed overview of the key steps, legal issues and market practices involved in the initial public offering process by examining practices in 21 jurisdictions around the world, with two general chapters focusing on the United States. Leading practitioners from each jurisdiction provide their expertise and guidance on navigating their local market practices and regulatory framework. Each chapter follows a similar structure: introduction of the IPO market in the relevant jurisdiction; description of the IPO process and key parties; discussion of the relevant regulators and key regulations; public company responsibilities; and potential risks, liabilities and pitfalls. We hope you find the book will equip you with an understanding of the legal and market fundamentals necessary for a successful IPO. Ilir Mujalovic & Harald Halbhuber, Shearman & Sterling LLP Foreword Aseel M. Rabie Securities Industry and Financial Markets Association (SIFMA) Introduction Equity markets are the public face of finance and are often seen as a barometer of the overall health of the economy. In that sense, a thriving market for new issues of publicly offered equity securities, or the initial public offering (IPO) market, is perhaps the most direct and tangible evidence of an economy where new businesses have confidence in their future prospects. Businesses most often seek to access a larger pool of public capital to allow for the next stage of growth and, ideally, job creation follows. After a decline in annual deal volume and value between 2014 and 2016,1 the U.S. IPO market returned to pre-2015 levels in 20172 and continued to build momentum throughout 2018,3 20194 and the first quarter of 2020,5 until the IPO market was virtually shut down mid-March as a result of market volatility and uncertainty associated with the COVID-19 pandemic, an oil slump triggered by production increases by Saudi Arabia and Russia, and the resulting prospect of a recession. As the markets are expected to continue to be volatile and uncertain, the IPO market will likely face similar challenges, especially in the near term. Notwithstanding these fluctuations in IPO activity, history has shown that equity markets have played a central role during periods of significant economic expansion in the United States. The benefits of seeking public capital date back in history at least as far as 1602, when the Dutch East India Company was founded as a shareholder company. This diversified investor structure allowed the risks of trade voyages between Europe and Asia to be distributed across multiple mercantile organizations.6 Historians do not readily agree on when the first securities market began in the United States; however, according to at least one historian, securities transactions took place as early as 1725 in New York.7 At the time, a small number of securities transactions were intermediated by auctioneers who primarily conducted auctions for commodities that flowed through the ports of New York. While this form of intermediation was far less structured in the early days, a more formalized process began to emerge with the Buttonwood Tree Agreement in 1792, where 24 stockbrokers agreed on dealing terms. This organization is understood to have been the foundation of what would become the New York Stock and Exchange Board, or the New York Stock Exchange as we know it today.8 These arrangements provided an orderly mechanism to support the economic expansion that took hold in the United States during the 1800s. Tremendous investment in infrastructure and transportation led the way, while the New York Stock Exchange permitted the formation and growth of dozens of companies that became integral to the economy. Emerging regulatory framework Despite the growing significance of the New York Stock Exchange and open criticism in the early 1900s of its failure to adopt more stringent self-regulation, structural government GLI – Initial Public Offerings 2020, Fourth Edition 1 www.globallegalinsights.com © Published and reproduced with kind permission by Global Legal Group Ltd, London Securities Industry and Financial Markets Association (SIFMA) Foreword oversight did not come until the 1930s. Even the 1907 financial crisis focused attention on the banking system rather than the capital markets, and culminated in the Federal Reserve Act of 1912 and creation of the central banking system in the United States.9 The securities markets continued to innovate with minimal government oversight, and in 1924 the Massachusetts Investors Trust, which is believed to be the first modern-day mutual fund with an open-end capitalization structure, was created.10 Like the Dutch East India Company before it, the structure spread financial risks among a diversified pool of investors and for the first time provided smaller investors access to the securities markets. However, it was the 1929 stock market crash and the beginning of the Great Depression that would eventually spur an investigation and substantive review of the securities markets, as well as the role of the New York Stock Exchange therein. The subsequent passage of the Securities Act of 1933 and the Securities Exchange Act of 1934 created the foundation of the regulatory structure that we know today. Importantly, as the United States later experienced a post- war boom with the growth and development of new industries, this more fortified exchange structure
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