CONTENTS
- 1. Stock Listing | The Meaning of an IPO and the Role of the Law Firm
- - The Role of the Law Firm at the IPO Stage
- 2. Stock Listing | Obligations and Due Diligence at the Preparation Stage
- - Due Diligence on Core Business Contracts and Intellectual Property (IP)
- - Due Diligence on Litigation, Contingent Liabilities, and Compliance Systems
- 3. Stock Listing | Representation and Liability Management at the Disclosure and Review Stage
- - Response to the Preliminary Listing Review and Representation in the Exchange Review
- 4. Stock Listing | Regulatory Compliance and Dispute Response After Listing
- - It Is Advisable to Receive Advice From an Attorney Experienced in the Capital Markets Act
1. Stock Listing | The Meaning of an IPO and the Role of the Law Firm
A stock listing (IPO, Initial Public Offering) refers to the series of procedures by which a company first publicly issues its shares to the general public, officially registers its stock certificates on a market such as the securities market (KOSPI) or the KOSDAQ market of the Korea Exchange (KRX), and commences trading.
A stock listing can be seen as a key step in entering the capital market, providing a company with the opportunity to raise public offering funds and laying the foundation for sustainable growth by strengthening management transparency and enhancing corporate value.
Every part of the IPO process is subject to complex and strict regulations, such as the Financial Investment Services and Capital Markets Act (Capital Markets Act) and the listing rules of the Korea Exchange.
Because the formal review requirements differ by market, such as the KOSPI and KOSDAQ markets, and a stock listing is decided after the qualitative review requirements are considered, a company must clearly demonstrate factors such as its continuity as a going concern, management transparency, and management stability, including its business, financial condition, and management environment, at stages such as the preliminary listing review.
The Role of the Law Firm at the IPO Stage
Attorneys who have represented numerous stock listings under the Capital Markets Act, such as corporate and finance attorneys, play a key role in securing the legal stability and legality of a company pursuing an IPO.
A successful stock listing requires expertise in many areas, such as finance, accounting, and law. In particular, legal due diligence, the reduction of disclosure liability, and responding to regulatory authorities are the distinctive domain of the attorney, who helps build a safe foundation for a successful listing.
The attorney diagnoses and resolves potential legal risks in advance through legal due diligence during the company's early preparation stage, and reviews the legal adequacy of the disclosure documents to fulfill the duty of investor protection.
2. Stock Listing | Obligations and Due Diligence at the Preparation Stage
The first step and most important foundational task in the stock listing process is legal due diligence, which systematically identifies and eliminates legal risks.
It can be seen as a procedure for identifying potential defects and securing eligibility for listing through a comprehensive ‘legal health check’ of the company pursuing the listing.
The management transparency required of a listed company is the foremost item of review in legal due diligence.
Due Diligence on Core Business Contracts and Intellectual Property (IP)
A company seeking a stock listing should closely review the rights relating to the core contracts and assets that legally underpin its ability to sustain its business.
Due Diligence on Litigation, Contingent Liabilities, and Compliance Systems
Identifying legal risks that may have a material effect on a company's financial condition and thereby reducing contingent liabilities is also part of the work of the team of attorneys advising on the stock listing.
3. Stock Listing | Representation and Liability Management at the Disclosure and Review Stage
Based on the information verified through legal due diligence, the team of attorneys advising on the stock listing plays a key role in ensuring that the disclosure documents submitted to regulatory authorities such as the Financial Supervisory Service and to the exchange fully meet the legal requirements, in distributing the issuer's legal liability, and in responding to the review process.
The securities registration statement and the prospectus, which are the core documents of an IPO, are documents that provide information with a material effect on investors under the Capital Markets Act.
If those documents contain ‘a false statement or omission of a material matter,’ not only the issuer but also the representative director, the certified public accountant, and even the attorney of the law firm that provided the advice may bear joint liability for investor losses.
The legal review therefore demands the utmost care.
1) Legal review of the securities registration statement and prospectus : confirming and revising, from a legal standpoint, whether the stated business content, financial information, and risk factors match the results of the legal due diligence, and whether all mandatory disclosure items under the Capital Markets Act have been included.
2) Advisory on clarifying investment risk factors : the attorney advises the company to describe all potential risks it faces (management control, regulation, litigation, and so on) as accurately and comprehensively as possible from the standpoint of legal liability, so as to prevent disputes arising from a failure to disclose in the future.
3) Submission of a legal opinion on the legality of the disclosure documents : submitting a formal legal opinion on the legality of the disclosure documents that are filed, thereby enhancing the credibility of the documents and helping to distribute the issuer's legal liability.
4) Representation in responding to correction requests from the Financial Supervisory Service : by preparing clear responses to correction requests arising during the Financial Supervisory Service's review of the securities registration statement, such as those concerning governance transparency and the reasonableness of related-party transactions, the period required to pass the review can be shortened.
Response to the Preliminary Listing Review and Representation in the Exchange Review
The preliminary listing review application submitted to the Korea Exchange is a legal document demonstrating that the company has met the exchange's listing requirements.
The company must conduct a final review of whether it meets the listing eligibility requirements, such as its finances, management performance, and share distribution requirements, and then prepare and submit the application. For in-depth inquiries that may arise during the exchange's review process, the legal professional provides prompt and accurate responses grounded in logical reasoning.
For matters pointed out as falling short of the stock listing requirements, the firm establishes a plan for legal improvement through measures such as amending the articles of incorporation, newly enacting or revising internal rules, and modifying key contracts, and assists with its implementation.
4. Stock Listing | Regulatory Compliance and Dispute Response After Listing
Even after the stock listing is completed, the advisory team provides ongoing legal counsel and risk management so that the listed company can operate stably and transparently in the capital market.
Category | Main Work Content |
1. Advisory on disclosure obligations and the regulatory compliance system after listing | Advisory on ongoing compliance with disclosure obligations : advising so that periodic reports (annual and quarterly reports) and ad hoc disclosure matters are made accurately and on time in accordance with the regulations → Preventing sanctions such as designation as a company with unfaithful disclosure and penalty surcharges |
Prevention of insider trading and unfair trading : providing education and supporting the establishment of a compliance system regarding insider trading regulations, such as the prohibition on the use of material non-public information by executives and major shareholders → Blocking the risk of violating the Capital Markets Act and protecting management | |
Advisory on non-financial factors such as ESG : diagnosing legal risks related to ESG (environmental, social, and governance) and supporting the establishment of a management system for compliance with related laws such as the Serious Accidents Punishment Act → Fulfilling non-financial disclosure obligations and securing social responsibility | |
2. Response to securities-related disputes and litigation representation | Representation in damages lawsuits and securities class actions : representing the company in lawsuits brought by investors over violations of disclosure obligations, and building a defense theory → Defending against effects that could be critical to corporate credibility and the share price |
Response to sanctions by regulatory authorities : when an investigation or sanction by the Financial Supervisory Service or the Korea Exchange (a penalty surcharge, trading suspension, and so on) arises, filing objections and representing the company in administrative litigation → Protecting the company's interests and minimizing the level of sanctions | |
3. Advisory on responding to crisis situations such as delisting | Response to the substantive review of listing eligibility : when embezzlement or breach of trust occurs involving the representative, directors, or executives, establishing the legal reasoning for the improvement plan and representing the company in its submission → Maintaining the company's continuity as a going concern and keeping the listing |
Establishing a legal remedy plan : advising on and implementing prompt legal remedy measures for crisis situations that carry a risk of delisting, such as subsequent corporate rehabilitation proceedings and restrictions on the disposal of shares → Assisting with decisions and judgments concerning the company's operation under adverse conditions such as delisting |
It Is Advisable to Receive Advice From an Attorney Experienced in the Capital Markets Act
As described above, the attorney serves as a key partner who builds not only the financial and business stability of the company but also a legal safety net throughout the entire stock listing process, laying a solid foundation for the company to successfully enter the capital market and continue to grow.
Our firm has attorneys who understand the particular characteristics of each industry and who have extensive experience in matters such as representing stock listings and advising on the substantive review of listing eligibility, so we can accurately anticipate the perspective of the review.
In addition, because the firm includes accountants, tax accountants, labor consultants, customs experts, and other evidence investigation specialists, it creates synergy in managing legal liability and resolving issues during due diligence.
If you need assistance with a stock listing, we invite you to bring your matter to our firm, which can cover everything from establishing a compliance framework before and after listing to responding to the risk of delisting.
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