The issuing entity
Most exchanges require shares to be issued by a company whose legal form allows freely transferable shares and public offerings. In Germany that means converting, for example, a GmbH into an AG, a KGaA or an SE. Other countries have equivalents such as a PLC in the UK or an S.A. in several civil-law countries.
Conversion is a legal process with resolutions, reports, valuation of contributions, registration and, depending on the route, protections for creditors, employees and minority shareholders. It must be planned into the timetable: it affects the audit (new entity, possibly a new financial year) and the prospectus.
Questions to settle:
- Which entity will be the issuer? The current parent, a new holding company, or an intermediate company?
- Does the issuer jurisdiction fit the target investors and venue?
- Does a different domicile bring tax, governance or index consequences?
Group structure
Investors and regulators need to understand the group. Before drafting:
- Remove dormant or legacy entities that add complexity.
- Ensure operating assets, IP, licences and key contracts sit inside the issuer group.
- Document intercompany agreements, cash pooling, guarantees and transfer pricing.
- Review change-of-control clauses in financing, customer and supplier contracts that an IPO or new shareholder structure might trigger.
Share capital and share classes
- Set the number of shares so that the expected offer price falls in a range typical for the venue.
- Decide whether to have a single share class or dual-class structures with different voting rights, and check whether the venue, segment and target indices accept them.
- Approve authorised capital and the exclusion of pre-emption rights needed for the offering, the greenshoe and future capital measures.
- Plan any conversion of preference shares, convertible loans or warrants at listing.
Shareholder arrangements
Private company shareholder agreements contain rights that do not fit a listed company: veto rights, board appointment rights, drag-along and tag-along clauses, information rights and transfer restrictions. Typical steps:
- Terminate or amend them effective at listing.
- Replace them, where needed, with a relationship agreement between the company and a controlling shareholder, setting arm's length dealings and independence safeguards.
- Agree lock-up undertakings with existing shareholders.
Board and committees
Investors and governance codes expect:
- Independent board members who can challenge management and represent minority interests.
- An audit committee with at least one member with accounting or audit expertise. It oversees financial reporting, the audit, internal controls and risk management.
- A remuneration committee that sets and discloses executive pay policy.
- A nomination committee, depending on the market and size.
- Rules of procedure, a schedule of reserved matters, and a board calendar aligned with the reporting cycle.
In two-tier systems such as Germany's, the supervisory board takes these roles and its composition is subject to co-determination rules where applicable.
Recruiting independent directors takes months. Start early, and have them in place before the prospectus describes the board.
Management and incentives
- Review management contracts: terms, notice periods, non-competes, change-of-control clauses.
- Design long-term incentive plans that align management with public shareholders, with performance conditions investors understand.
- Handle existing virtual or phantom share programmes: many vest or convert at the IPO and create cash, dilution or accounting effects.
- Disclose remuneration in line with the applicable regime.
Corporate governance code
Most markets have a corporate governance code on a comply-or-explain basis. Do a gap analysis against the code that will apply and decide where the company will comply and where it will explain. The result appears in the prospectus and in the first annual report.
Policies to have at listing
- Insider and dealing policy, including closed periods and pre-clearance for managers.
- Disclosure policy for price-sensitive information.
- Related-party transaction policy.
- Code of conduct and whistleblowing procedure.
- Dividend policy, if the company will state one.
The readiness checklist covers the governance items in detail.