• This is typically the largest single cost of an Initial Public Offer (IPO).
• It may be structured to include a fixed or retainer component, but it is usually a fixed percentage of the gross proceeds of the issue.
• The percentage will depend on the size of the offer.
• If the offer is underwritten, the fee will be higher to remunerate the broker for taking on the underwriting risk.
• If the minimum subscription under the offer is not achieved, the IPO will not proceed and the broking fee will not be payable.

• Many companies engage a corporate adviser to assist in preparing the company for an IPO.
• The corporate adviser may also project manage the IPO, liaising with the ASX, brokers and other advisers on behalf of the company.
• The corporate adviser will generally charge a small retainer fee, but will be remunerated principally by a fee payable on successful completion of the IPO.

• The corporate adviser will often take shares in the company in lieu of a cash payment.

• The legal costs associated with an IPO vary widely depending on the extent of additional work in relation to pre-IPO restructuring, dealing with legal issues arising from due diligence, and drafting legal documentation in relation to directors service agreements, share-based incentive schemes or commercial arrangements which need to be formalised.
• While companies may negotiate fixed or capped fees, legal fees are generally based on time spent in connection with the IPO.

• The accountants may also generally participate in the due diligence committee and provide advice on accounting, taxation and other matters in connection with the IPO.
• There may be additional costs if the company’s financial statements have not previously been subject to audit.

• Certain IPOs may require other independent reports to be included in the prospectus.
• Costs will reflect the work involved in researching and preparing each report.

• The ASX charges fees to be admitted to listing, based on their initial market capitalisation.

• The cost of printing prospectuses, including associated graphic design work and proofing.
• Companies will also incur costs in relation to the share registry, which is generally outsourced to a major service provider, and may also choose to arrange insurance to cover the potential liabilities of the directors in relation to prospectus disclosure.

• Corporate governance principles
  
  • While recognising that smaller companies may be unable to comply in full, all companies are required to disclose their annual report the extent of, and reasons for, any non-compliance.
  • Where detailed recommendations have not been followed, it is nonetheless important to adopt appropriate structures, policies and procedures to ensure that the key principles are adhered to.
• Board numbers and makeup
  
  • Size and composition of the board should be determined on a case-by-case basis.
  • The board of a newly listed company comprises between three and seven directors, three being the minimum stipulated under the Corporations Act for a public company.
• The company’s best interests
  
  • The size of the board should be sufficient to bring a variety of perspectives and skills and to represent the best interests of the company and its shareholders as a whole.
  • At the same time, the board should not be so large as to limit its effectiveness as a decision-making body.
• Suitability to meet future needs
• The skills, capabilities and independence of existing directors should be objectively assessed by reference to the next stage of the company’s strategic development and the responsibilities of the board of a listed company.
• Independence of members
  
  • Under the ASX guidelines, a majority of the board – including the chairperson – should be independent.
  • They should not hold management positions in the company, represent substantial shareholders or hold any business or other relationship which may interfere with the exercise of their independent judgement.
• Select for skills
  • When seeking to appoint non-executive directors, start by clearly identifying the skills and competencies sought for the board.
  • These are likely to include both general attributes and specific skills, which may include industry expertise, public profile, experience of the listed company environment, or ability to assist the company in achieving its strategic objectives.
• Seek professional assistance
• Use professional advisers to assist in sourcing suitable candidates for non-executive roles on the board.
• Time and commitment issues
  
  • Ensure that proposed non-executive directors are able to devote the required time and commitment to the role.
  • Make expectations clear upfront and ascertain the extent of their other commitments.
• Interaction between board members
  • A potential non-executive may have a high public profile, strong investor appeal and outstanding industry credentials, but unless he or she can work effectively with other members of the board and management, the appointment is unlikely to be successful.
•  Terms and conditions of appointment
  •  The remuneration of non-executive directors should be a fixed amount.
  • It may comprise a combination of cash, non-cash benefits and shares, but should not include options or bonuses.

Estimated cost of an IPO

Disclaimer: This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in this newsletter is for guidance only and should not be relied upon without obtaining professional advice having regard to your specific circumstances.
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