1. Start with Liability before Drafting the Indemnity
The indemnity clause should track the legal risk behind the offering. For a foreign issuer, that means tying each key statement to the party that supplied it and to the loss the clause is meant to cover. This keeps the contract tied to the actual offering record, not a broad risk label.
Separate Section 11 Liability from Contract Risk
Section 11 covers material misstatements or omissions in a registration statement and lists underwriters among possible defendants. Contract terms do not replace its liability rules or defenses.
- Identify issuer and underwriter disclosure items.
- Match indemnity terms to the source of the statement.
- Review related Securities Act exposure before signing.
Check Public-Policy Limits and Contribution
An indemnity should not assume that every Securities Act loss can be shifted by contract. Federal rules reflect the SEC's position that some indemnification for Securities Act liability is against public policy.
- Define covered claims, losses, and defense costs.
- Check notice, defense, and settlement rights.
- Read contribution terms with the indemnity clause.
2. Tie Due Diligence to the Liability Record
Due diligence supports more than the closing process. Section 11 gives specified defendants a defense based on reasonable investigation and reasonable grounds for belief, subject to the statute. The same file can show why the team accepted, changed, or rejected a disclosure point.
Build the File Around Material Statements
Cross-border review gets harder when records and decision-makers sit in different places. The file should show what was checked, who answered, and which points stayed open.
- Assign an owner to each key disclosure topic.
- Track source records and open questions.
- Resolve conflicts before the final filing.
Coordinate Accountants and Local Advisers
Financial data may pass through teams using different standards and work methods. The deal team should flag where additional U.S. .eview is needed rather than assume the procedures match.
- Confirm the scope of comfort procedures.
- Flag disclosures that need local legal input.
- Coordinate related Capital Markets & Securities work.
3. Keep Federal and Home-Country Duties Separate
A foreign issuer may face federal offering duties and home-country rules at the same time. The agreement should show which team owns each filing, update, and representation. That split matters when a late change must be cleared in more than one place.
Assign Prospectus Duties Clearly
Prospectus content can affect representations, indemnity, and closing terms. Clear ownership helps the team act when a material fact changes late in the deal.
- Map issuer and underwriter information.
- Check contract statements against offering papers.
- Assign responsibility for material updates.
Do Not Treat One Regime As a Substitute
Home-country compliance does not itself satisfy federal disclosure duties. Each legal track needs its own review before the contract assigns risk for a filing or statement.
- List the disclosures governed by each regime.
- Flag timing or wording conflicts.
- Record who owns each response or filing.
4. Review Fees and Exit Rights with the Indemnity
Termination and expense terms can move real cost when an IPO changes or stops. They should be read with the indemnity, closing terms, and underwriter compensation rules. A fee term can survive a failed deal even when the main sale never closes.
Define Walk-Away Triggers Precisely
Broad market-out or adverse-change terms may give an underwriter wide room to exit before closing. The contract should state the events that actually support termination.
- Define the relevant exit events.
- Check notice and decision steps.
- Identify duties that survive termination.
Check Finra Rule 5110 Terms
Rule 5110 regulates underwriting terms and compensation for covered public offerings. Expense payments and some termination fees can fall within that framework.
- List compensation and reimbursed expenses.
- Check termination fees under the rule.
- Link those terms to the full IPO Agreement review.
5. Choose the Dispute Path before a Claim
A strong indemnity still needs a workable dispute clause. Governing law, forum, arbitration, and enforcement terms should fit the parties and the cross-border deal. The clause should also fit where key parties and records are likely to be found.
Separate Governing Law from Forum
General Obligations Law §§ 5-1401 and 5-1402 address qualifying governing-law and state-court forum choices. A contract alone cannot create federal subject-matter jurisdiction.
- State governing law and forum separately.
- Check whether the statutory conditions apply.
- Confirm jurisdiction before naming a federal court.
Compare Court and Arbitration Terms
Arbitration can change procedure, discovery, privacy, and cost allocation. Those points matter when an indemnity or contribution claim spans parties or evidence abroad.
- Identify the seat and governing rules.
- Review fee and cost provisions.
- Use International Arbitration review where relevant.
6. Frequently Asked Questions
Can an issuer indemnify an underwriter for every securities claim?
No blanket answer applies. Federal securities law and public-policy limits can restrict indemnification, so the clause should be read with the claim, disclosure source, and contribution terms.
Can Section 12(a)(2) affect an IPO underwriting review?
Yes. Section 12(a)(2) can apply to specified material misstatements or omissions in a prospectus or oral communication. The facts and statutory elements still control.
Should underwriter-supplied information have a separate indemnity?
Many agreements distinguish written information supplied by underwriters from issuer information. The final clause should match the actual disclosure record and negotiated terms.
Can an international underwriting agreement use arbitration?
Yes, subject to applicable law and the agreement. The clause should address scope, seat, rules, costs, and enforcement rather than use a bare arbitration reference.
7. Review Liability Allocation before Signing
Indemnity terms should fit the disclosure record, diligence file, contribution clause, exit rights, and dispute path. SJKP's attorneys can review those linked terms and coordinate cross-border contract issues with the offering team. An international IPO underwriter agreement review attorney can flag terms that need attention before execution.
10 Aug, 2026
