3.2 IPO advisors and Statutory Auditors

In the IPO process, several key intermediaries play a crucial role in ensuring the smooth execution of a company's public offering. Among these intermediaries are IPO Advisors and Statutory Auditors, both of which contribute significantly to the successful launch and compliance of an Initial Public Offering (IPO).

IPO Advisors are experts who guide companies through the complex IPO process, from selecting the right merchant banker to ensuring compliance with legal and regulatory requirements. They assist with crucial tasks such as preparing the Draft Red Herring Prospectus (DRHP), conducting due diligence, determining valuations, and marketing the IPO to attract investors. Their ongoing support post-IPO helps companies maintain compliance and manage investor relations.

On the other hand, Statutory Auditors ensure the accuracy and transparency of a company's financial statements, providing an independent review of its accounts. As per the Companies Act, 2013, every company must appoint a statutory auditor, who plays a key role in building trust with investors by verifying the financial health of the company before it goes public.

Together, these intermediaries help facilitate a successful IPO by providing expertise, ensuring regulatory adherence, and fostering investor confidence.

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 Role of IPO Advisors in SME IPO and Mainboard IPO process;

1. IPO advisory firms help the IPO bound companies to choose the top merchant banker in India. Choosing the right merchant banker is the crucial step for listing on primary markets.
2. They ensure the company meets all legal and regulatory requirements, helping with accurate documentation like the Draft Red Herring Prospectus (DRHP).
3. Advisors assist with due diligence, reviewing financials, operations, and legal matters to ensure transparency and build investor trust.
4. They help prepare the DRHP, a key document that provides essential information about the company to attract potential investors.
5. IPO advisors assist in arriving at company valuations, ensuring the IPO is fair and appealing to investors.
6. They assist in marketing the IPO through roadshows and investor meetings, generating interest and attracting the right investors.
7. After the IPO, advisors continue providing support with compliance, managing investor relations, and offering strategic advice for long-term success.

IPO Advisors (Link of IPO Advisors blog)

Statutory Auditors

As per section 139 (1) of Companies Act,2013

Every company must appoint an auditor at its first annual general meeting (AGM), either an individual or a firm. This auditor will stay in office until the end of the company’s sixth AGM and will continue to serve for every sixth meeting after that. The process of selecting the auditor at the meeting will follow certain rules.

Before the appointment, the company must get the auditor’s written consent for the appointment, along with a certificate from the auditor confirming that the appointment meets required conditions. The certificate should also confirm that the auditor meets the criteria specified in Section 141.

After the appointment, the company must inform the auditor about their appointment and file a notice with the Registrar of Companies within 15 days of the meeting where the appointment was made.

3.3 Registrar to the Issue

The Registrar to an IPO plays a vital role in ensuring the efficient processing and management of an Initial Public Offering (IPO). Appointed by the company issuing securities, the Registrar handles key administrative tasks, such as collecting applications from investors, maintaining records, determining the basis of allotment, and processing refunds. Additionally, they facilitate the transfer of shares to investors' demat accounts and issue important documents like allotment letters and refund orders. These responsibilities are crucial to ensure transparency and fairness throughout the IPO process.

To serve as an IPO registrar, the entity must be registered with SEBI and meet specific eligibility criteria, including having the necessary infrastructure, experience, and compliance with regulatory requirements. Importantly, a registrar cannot be associated with the company issuing the securities to avoid conflicts of interest and maintain impartiality.

Investors can reach out to the registrar directly for assistance with IPO-related queries, such as allotment status, refunds, or demat account issues. By ensuring that all transactions are handled smoothly, the Registrar helps make the IPO process more efficient for both companies and investors.

Who is an IPO Registrar?

A Registrar to an IPO refers to the person or organization appointed by a company or group to handle specific tasks related to a securities offering. Their main responsibilities include:

1. Collecting applications from investors for the Issue of securities.
2. Maintaining records of the applications and payments received from investors, as well as payments made to the sellers of the securities.
3. Assisting the company in several key areas, such as:
   • Working with NSE Emerge or BSE SME to determine the basis of allotment of securities.
   • Finalizing the list of individuals or entities who are eligible to receive the securities.
   • Processing and sending out allotment letters, refund orders, certificates, and other important documents related to the IPO.

In simple terms, the Registrar ensures that the entire process of collecting applications, allotting securities, and issuing related documents runs smoothly and efficiently.

Who can be an IPO Registrar?

IPO Registrars are independent financial institutions registered with stock exchanges and hired by companies which are going public. Their main role is to manage the records of the IPO and the ownership of shares.

The Registrar’s duties include processing IPO applications, allocating shares to investors according to SEBI rules, handling refunds, and transferring shares to investors’ demat accounts.

Investors can contact the Registrar for help related to the IPO, such as not receiving allotment letters, shares not being credited to their demat accounts, or refund problems.

What is the role of the Registrar and Transfer Agents (RTA) in an IPO?

1. RTA helps the company to go public.
2. RTAs are independent financial institutions registered with SEBI (Securities and Exchange Board of India).
3. A company planning an IPO appoints a RTA to handle technical and administrative tasks.
4. The RTA manages IPO applications from investors.
5. The RTA processes share allocations according to SEBI guidelines.
6. The RTA handles refunds for unallotted applicants through ECS or cheque.
7. The Registrar ensures that allocated shares are transferred to investors' Demat accounts.
8. This helps make the IPO process more efficient for both the company and investors.

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Who Appoints the Registrar to the IPO?

The company issuing the securities (through an IPO, rights issue, etc.) appoints the registrar. The company can choose a registrar from a list of registered entities that are authorized by SEBI. Often, investment banks or underwriters handling the IPO might also recommend specific registrars based on their experience and capabilities. (list of registrars)

List of IPO Registrars registered with SEBI.

www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=10

What are the Eligibilities of a Registrar to the IPO?

The registrar must be a SEBI-registered entity with the necessary qualifications to handle securities transactions. The entity should have experience in handling large-scale applications, maintaining records accurately, and managing refunds and share allotments.

The registrar must also adhere to the rules and regulations prescribed by SEBI and the relevant stock exchanges to ensure transparency and fairness for IPO.

SEBI considers the following when granting a certificate of Registrar:

a)     The applicant has the necessary infrastructure (office space, equipment, manpower) to effectively carry out activities.

b)    The applicant has relevant past experience in the activities.

c)     Neither the applicant nor anyone connected with them has been denied registration under the Act.

d)    The applicant meets the capital adequacy requirements specified in regulation 7.

e)     The applicant is not subject to any disciplinary proceedings under the Act.

f)     Neither the applicant nor its directors, partners, or officers has been convicted of an offence involving moral turpitude or economic offences.

g)    The applicant is deemed a fit and proper person.

Can a Registrar to the Issue handle the IPO of a company if they are associated with the company?

No, a registrar to the Issue cannot act as the registrar for a company if they are considered an "associate" of that company.

According to the rule 13A of SEBI (Registrars to an Issue and Share Transfer Agents) Regulation, 1993, a registrar is considered an "associate" of the company if:

1.     The registrar or the company has control of at least 10% of the voting power in the other party. This means if the registrar or the company issuing securities owns a significant stake (at least 10%) in each other, they cannot act together on an issue.

2.     If the registrar or any of their relatives are directors or promoters of the company issuing the securities (or vice versa), they are also considered associates, and thus the registrar cannot act for that company.

This rule is in place to maintain fairness and prevent any conflict of interest. It ensures that the registrar remains independent and unbiased in handling the IPO or any securities issuance.

Can Investors contact the Registrar Directly?

Yes, investors can contact the registrar for inquiries related to their IPO applications, allotment status, refund processes, or Demat account transfers. Typically, the contact details of the registrar are made available in the Prospectus or Offer Document of the IPO.

The registrar provides helpdesk services for investors to resolve any issues they may face during or after the application process.

3.4 Role of Compliance Officer (Company Secretary) in IPO process

Introduction- The Compliance Officer plays a vital role in ensuring the company adheres to all legal, regulatory, and procedural requirements during the IPO process. They ensure compliance with guidelines set by regulatory authorities like SEBI and stock exchanges, oversee the accuracy and timeliness of mandatory filings such as the Draft Red Herring Prospectus (DRHP) and Red Herring Prospectus (RHP), and act as the primary liaison with regulators.

It is to be noted that full time (in house) Company Secretary and Chief Financial Officer (CFO) has to be appointed before filing DRHP for IPO and to comply with the listing requirements. The CS can then directly coordinate with other intermediaries like Registrars (RTA), Bankers and merchant bankers at the time of allotment and listing of shares.

Their proactive role helps mitigate legal risks and ensures a smooth and transparent IPO process.

In the IPO process, the Company Secretary (CS) plays a pivotal role in ensuring legal and regulatory compliance and guiding the company through a smooth transition to a public listing. Key responsibilities of the CS include:

An image of key responsibilities of CS in IPO

1. Preliminary Due Diligence: The Company Secretary coordinates with legal counsel to conduct due diligence, responding to requisition lists and ensuring all necessary information is disclosed.
2. Promoter Identification: The CS helps prepare the promote profile to accurately identify the promoters and promoter group, ensuring clarity for regulatory filings.
3. Corporate Governance Documentation: The CS is responsible for drafting and implementing various corporate governance policies, including those related to disclosures in the Draft Red Herring Prospectus (DRHP), such as the Vigil Mechanism, Board Evaluation, RPT (Related Party Transactions), POSH (Prevention of Sexual Harassment), Risk Management, and others. These policies are crucial for ensuring transparency, accountability, and regulatory compliance.
4. Board Composition and Policies: The Company Secretary ensures the proper composition of the board and its committees. This includes ensuring diversity, compliance with relevant corporate governance standards, and preparing policies related to the nomination and remuneration committee (NRC), succession planning, and familiarization processes for independent directors (IDs).
5. Corporate Governance Conformity: The Company Secretary ensures that all internal processes and external disclosures are in line with corporate governance norms, addressing key areas such as preservation of documents, dividend distribution, and materiality of events and disclosures, particularly with respect to group companies and ongoing litigation.
6. Virtual Data Room (VDR) Management: In coordination with other departments, the CS ensures that all relevant documents are available in the VDR for Merchant Bankers, auditors, and regulators during the IPO process.
7. Assisting with Certifications and Undertakings: The CS ensures that standard certifications and undertakings required during the IPO process are obtained and filed.
8. Risk Factor Review: The CS works with the board and management to review internal and external risk factors, ensuring they are adequately discussed and disclosed in the DRHP. Legal opinions from counsel regarding subsidiaries and joint ventures are also reviewed.
9. Regulatory Disclosures: The CS is responsible for maintaining continual disclosure to all relevant statutory and regulatory authorities throughout the IPO process.
10. Resolving SEBI/relevant stock exchange Comments on DRHP: The CS advises the company and other intermediaries in addressing and resolving any comments or observations from SEBI on the DRHP, ensuring that the final offer document complies with regulatory requirements.

Through these steps, the CS ensures that all legal, governance, and regulatory aspects of the IPO process are handled meticulously, facilitating a successful public offering and smooth transition to a listed entity.

After the completion of IPO and completion of listing, a listed company has to comply with LODR (Listing Obligations and Disclosure Requirements) requirements as stated below:

Regulation 6 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR)

1. Appointment of Compliance Officer:
   • Every listed entity must appoint a qualified Company Secretary as the Compliance Officer.
2. Filling of Vacancies:
   • Any vacancy in the office of the Compliance Officer must be filled at the earliest and no later than three months from the date of such vacancy.
   • An interim appointment can only be made if it complies with applicable laws and ensures the appointee meets all obligations under these laws.

It shall also be noted that appointment of Company Secretary is applicable as per the below regulations: 

Section 203 of the Companies Act, 2013

Under Section 203 of the Companies Act, 2013, read with Rule 8 and Rule 8A of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

1. Requirement for Listed and Public Companies:
   • Every listed company and every public company with a paid-up share capital of Rs. 10 Cr. (Rupees ten crore) or more must appoint whole-time Key Managerial Personnel (KMP), including a whole-time Company Secretary.
2. Requirement for Private Companies:
   • As per Rule 8A, every private company with a paid-up share capital of ten crore rupees or more is also required to appoint a whole-time Company Secretary.

Responsibilities of the Company Secretary for a listed company

The Company Secretary (CS), particularly in listed entities, plays a critical role in ensuring regulatory compliance and effective governance. Their primary responsibilities include:

(a) Ensuring Compliance with Regulatory Provisions

• Ensure that the listed entity adheres to all applicable regulations in letter and spirit, maintaining the integrity of compliance processes.

(b) Coordination and Reporting

• Act as a bridge between the company’s Board, recognized stock exchanges, and depositories.
• Ensure timely reporting and coordination concerning compliance with:
  • Rules
  • Regulations
  • Directives issued by these authorities.

(c) Authenticity of Reports and Statements

• Verify that all procedures are properly followed to ensure the accuracy, authenticity, and comprehensiveness of information, statements, and reports submitted by the listed entity under applicable regulations.

(d) Grievance Redressal

• Monitor and manage the designated email address for the grievance redressal division.
• Facilitate the registration and resolution of complaints received from investors in a timely and effective manner.