UK Law and Practice Contributed by: Dylan Doran Kennett, Michael Jacobs, Stephen Newby and Mark Ife, Herbert Smith Freehills LLP
prospects. A compelling equity story for the IPO will include information on market drivers and unique features compared to competitors. The equity story will appear in the prospectus, most notably in the founder’s letter and business over - view, but it is also used for marketing and book- building purposes. Key Employees/Management The company’s senior management will remain important to the business after IPO, so the pro - spectus will include a section on directors, sen - ior managers and corporate governance. New share plans for employees and executive direc - tors are usually put in place as part of the IPO process and described accordingly. It is market practice to include a summary of the expected remuneration policy in the prospectus, if the company has made these decisions prior to the IPO, which is then put to the shareholders at the company’s first post-IPO general meeting. Financial Information The prospectus must contain audited histori - cal financial information on the company and its group, covering the latest three financial years and the audit report for each year. High- growth companies have struggled in the past to meet current track record requirements (eg, pre-revenue companies such as e-commerce and technology companies, acquisitive compa - nies in the biotech, fintech and pharmaceutical sectors and other companies following “roll-up” acquisitive strategy), which the FCA has taken into account when proposing changes to the UK Listing Rules. IP/Data Protection Companies may find that IP issues not ade - quately addressed or altogether ignored sud - denly become material problems leading up to or following an IPO, sometimes leading to mul -
tiple shareholder claims after the IPO, causing the share price to tumble. For high-growth com - panies with a large amount of intangible assets, having an IP strategy in place protects these critical products and services, and can maximise enterprise value. Tax and Structure Investors may favour companies with a particu - lar company structure, such as the insertion of a holding company that will be the listing vehi - cle. In addition, companies might choose to re- incorporate in another jurisdiction if they want to take advantage of more flexible governance requirements or a particular tax structure. 7.2 Restrictions The UK’s National Security and Investment Act 2021 (NSIA) introduced new powers for the gov - ernment, acting through the Investment Security Unit of the Cabinet Office (ISU) to review invest - ments that it considers may give rise to a risk to the UK’s national security. Investments of more than 25% into businesses that have activities in one or more of 17 speci - fied sectors may be subject to a mandatory notification obligation, which requires the parties to notify the transaction to the ISU and obtain clearance prior to completion. Investments that do not trigger a mandatory fil - ing but still give the investor material influence over UK activities may be “called-in” for review if the government considers that they may give rise to a risk to national security. This power is exercisable at any time up to six months after the government becomes aware of the trans - action, provided this is also within five years of the relevant transaction. Parties may therefore choose to submit a voluntary notification to the
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