Preparing for an IPO: Legal Issues Companies Should Address Early

Most listing timetables slip for reasons that have nothing to do with the market. They slip because a legal issue that could have been addressed well in advance surface during the due diligence process.

An initial public offering (“IPO”) is often described as a financial exercise. In practice, the financial case is usually the easier half. What determines whether a company reaches the market on schedule and on the valuation it hoped for is the state of its legal house well before the due diligence working group is even appointed.

The Securities Commission Malaysia has recently issued the eighth revision of the Equity Guidelines on 28 May 2026, which came into effect on 3 June 2026, giving effect to the outcomes of its Market Segmentation Review. For the Main Market, the profit test now requires after-tax profit of at least RM15 million for the most recent full financial year and an aggregate of at least RM30 million over the most recent three full financial years. The revised guidelines also require that the reporting accountants have not expressed a modified opinion and that there is no statement of material uncertainty relating to going concern. 

The practical effect is that the runway has lengthened. A company that begins preparing twelve months out is now, in most cases, beginning too late. Below are the legal areas where early attention pays for itself many times over.

1. Corporate structure and pre-IPO restructuring

Many owner-managed businesses are not structured in the way a listed company is expected to be. For example, valuable assets still be held personally by the founder, dormant companies with unresolved compliance issues remain within the group or overseas entities may have been incorporated years ago without a clear ongoing purpose.

Before an IPO, the group structure often needs to be streamlined. This may involve carving out non-core businesses, removing dormant entities and entities with compliance issues and addressing conflicts where businesses are owned by promoters, substantial shareholders or directors. However, these changes take time. A restructuring exercise may have tax implications, require approvals or consents from third parties and more importantly, could affect the company's financial track record, particularly if it is relying on the profit test. For this reason, any restructuring should be planned well in advance of the audited financial period, rather than being carried out afterwards.

2. Conflicts of interest and related party transactions

Regulators and investors pay close attention to transactions between the listing group and its promoters, directors and substantial shareholders. Common examples include office premises leased from a director, supply or service arrangements with a family-owned company, employees or services shared between group and non-group companies and loans or advances between directors and the company.

Not all related party transactions need to be eliminated before listing. However, each arrangement should be properly identified, documented on arm's length terms and appropriately disclosed. If the arrangement is expected to continue after listing, it should also be covered under the company's recurrent related party transaction framework. In practice, undocumented or informal arrangements often cause the greatest delays, as they need to be formalised and supported with proper documentation within a limited timeframe.

3. Title, licences and regulatory approvals

Legal due diligence will assess whether the group genuinely owns its assets and has all the necessary rights, approvals and licences to operate its business. Common issues include land used by the company without any written agreement or documentation to support its right to occupy the land, breaches of land title conditions, buildings that do not have the required completion certificates, expired or non-transferable licences and permits, intellectual property that is still registered in the founder's name or has not been registered at all and missing environmental, health or safety approvals.

Resolving these issues often depends on third parties, such as land offices, local authorities and industry regulators, each with their own approval process and timelines. As a result, these matters are among the most common reasons for delays to an IPO submission. The good news is that they can usually be addressed if identified and acted on early enough.

4. Material contracts and change of control

Existing commercial arrangements should be reviewed early in the IPO preparation process. Important agreements, including customer contracts, supply agreements, financing arrangements, joint ventures, tenancy agreements and concession agreements, may contain provisions that are affected by a listing, such as change of control requirements, transfer restrictions, continuing obligations or consent requirements from lenders and counterparties.

Businesses that rely significantly on a small number of customers, suppliers or strategic partners should also assess whether their relationships are adequately documented. The absence of formal agreements may create uncertainty during due diligence and disclosure processes and may impact investor confidence and the company’s valuation.

5. Litigation, contingent liabilities and compliance history

Any pending or potential legal proceedings, tax disputes, regulatory investigations, third-party guarantees or unresolved statutory and regulatory compliance matters should be identified and assessed at an early stage of the IPO preparation process. These matters may require disclosure in the prospectus and may attract questions from regulators and potential investors. Early identification allows the group to take appropriate steps, whether by resolving the matter, regularising the position, making adequate provisions or preparing an appropriate disclosure strategy. This helps avoid situations where significant issues are only discovered at a late stage, leaving limited time for the group to address them before listing.

6. Board composition and corporate governance

A listed company is expected to have a strong corporate governance framework in place before going public. This includes having suitable independent directors, an effective audit committee and proper nomination and remuneration processes that are aligned with the Malaysian Code on Corporate Governance and the listing requirements.

Finding and appointing the right independent directors is not something that can be done overnight. A board that is only put together shortly before the listing submission may raise concerns about whether the company has given sufficient thought to its governance structure.

Good governance is also about how the company operates in practice, not just having policies and documents on paper. The group should ensure that key frameworks, such as board and committee responsibilities, approval authorities, internal audit, risk management, whistleblowing procedures and anti-bribery measures, are properly established and actively implemented before listing.

The company should also plan for management continuity, as significant changes to the executive team close to the listing may raise questions and could potentially affect the listing process.

7. Corporate records and statutory housekeeping

Corporate records and statutory compliance matters may appear routine, but they can become significant issues during an IPO due diligence process. Missing board minutes, unstamped share transfer documents, unregistered charges, incomplete registers of members and directors, or outdated constitutions that have not been updated following the Companies Act 2016 may need to be regularised before listing.

Having an experienced and proactive company secretary is therefore important, as a good company secretary helps ensure that statutory records, corporate filings and governance documents are properly maintained and up to date. This provides the necessary foundation for a smooth listing process.

Every statement in a prospectus must be supported by proper documentation and records. Where the necessary documents or historical records are missing, the company may need to spend significant time reconstructing the paper trail. These issues are often discovered at a stage when the IPO timeline is already tight, potentially causing unnecessary delays to the listing process.

8. Employment matters and workforce compliance

The group should ensure that its employment-related matters are properly regularised before listing. This includes putting in place proper employment contracts, ensuring that foreign worker documentation is complete and up to date, and confirming that all statutory contributions and employment-related obligations have been fully complied with.

Timing: What a realistic IPO preparation runway looks like

For most companies, proper IPO preparation should ideally begin 18 to 24 months before the intended listing submission. An IPO is not a process that can be successfully rushed, as many of the key requirements involve strengthening the company’s foundations over time.

A practical approach is to begin with a legal health check and gap analysis to identify potential issues early. This should then be followed by any necessary restructuring, corporate clean-up and rectification work while the company continues to build its audited track record. Once the fundamentals are in place, the company can focus on strengthening its governance framework, appointing the appropriate board members, and preparing for the formal due diligence and documentation stages.

Trying to compress these steps into a shorter timeframe does not necessarily make the IPO process faster. Instead, it often results in issues being discovered at a later stage, when the cost of resolving them is higher and the ability to manage delays is more limited. Early preparation gives the company greater flexibility, reduces execution risks and increases the likelihood of a smoother listing journey.

Conclusion: Start Early, Build with Confidence

An IPO is more than a fundraising exercise, it is a transformation that requires the company to operate at a higher standard of governance, compliance and transparency. Companies that begin preparing early will have greater opportunity to address gaps, strengthen their foundations and position themselves for a successful listing.

The most successful IPO journeys are not built in the final months before submission, but through careful planning and preparation well ahead of time. By taking a proactive approach, companies can reduce execution risks, avoid unnecessary delays and approach the listing process with greater confidence.

If your company is considering a listing on the Main Market, ACE Market or LEAP Market, we would be glad to discuss what preparation your timetable realistically requires.