From namkeen brand Bikaji serving up its brand image to raise funds by selling shares to Adani Wilmar, which was later hit by a stock market rout, 2022 had its share of eye catching IPOs. But at the same time, money raised from initial public offerings dropped by 50 per cent for FY23, as market volatility made investors cautious and kept firms at bay.
Companies eyeing a stock market debut now onwards will have to deal with new regulations, as SEBI has now instructed bankers to keep the name of their law firms out of offer documents.
What role do legal experts play?
According to a Financial Express report, the Securities and Exchange Board of India, has put out informal advisories to exclude lawyers from certificates about due diligence.
Bankers overseeing an IPO usually employ the services of law firms to conduct due diligence for the offer, since they don't deal with legal issues.
In addition to this, share sales on a larger scale have international and local legal experts, who advise bankers and also help shareholders.
As per current norms, the name of the lawyer for the issuer needs to be included in the offer document, but there isn't clarity about other legal representatives.
Who will be affected?
But since SEBI can't take action against lawyers for errors in conducting due diligence, it has called for their names to be excluded.
What the exclusion of multiple lawyers that review offer documents means is that firms and bankers become liable.
But this policy by SEBI will hit law firms the hardest, as those handling IPOs will lose out on visibility to promote their services.
