DPC supports projects related to digital culture, innovation, and entrepreneurship
26/04/2021Natural gas – Flow, treatment, processing, underground storage, conditioning, liquefaction, regasification, and commercialization activities
27/04/2021EXPERT OPINION
The time and turn for IPOs: how to prepare the company for public offerings
Trading shares on the stock exchange promotes a major transformation of the business. Accounting aspects must be considered in the preparations.
By Luciana Uchôa
The Brazilian stock market started 2021 quite busy. From January to March this year, thirteen (13) companies have already called the initial public offering (“IPO”). The number is expected to surpass previous years, as around thirty (30) companies are awaiting authorization to perform the IPO process. For an idea, over the past year, twenty-eight (28) companies have entered the Brazilian stock exchange, which has already represented the largest number since 2007.
Going public takes the business to new levels of growth. And increasingly this has been seen as something feasible, as the company now has the resources from the market to support its development plans.
Such a strategic decision also has huge impacts on management, requiring structural changes and transparency to deal with new requirements and stakeholders. Hence the need to prepare the company for this major transformation.
Preparing the company for the IPO
Going for an IPO requires the company to comply with legal and regulatory requirements, also seeking means of improving corporate governance and risk management.
Certainly, a close-held organization will need to update its practices and processes to adapt these functions to the requirements of the new position.
In this sense, the company must be structured to meet the requirements of the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - “CVM”) and the expectations of a market that will require access to financial and operational information. Dealing with pressure for accounting closing and public disclosures will be quite common.
The main requirements for going public are the following:
|
• Being incorporated as a Public Limited Liability Company (S.A.) • Having three years of financial statements audited by an independent auditor registered with the CVM (or audited from the beginning for companies under 3 years of incorporation) • Indicating a statutory IR director • Having a Board of Directors • Identify any listing segment and place an order for listing and admission to trading at B3 • Performing a public offering for distribution of securities registered or waived from registration by the CVM • The specific requirements of the chosen listing segments must also be observed
Source: IPO Guidelines at B3 |
The preparatory phase includes a series of steps, bringing together agents from different specialties in internal, legal and market assessment. This movement takes time, and it is not a process that can be started and completed so immediately.
Some requirements are related to financial and accounting aspects, tasks that should be left to those who have an integrated and strategic vision and expertise to accompany the company on its IPO journey.
Financial and accounting assessment processes
The work must start by a diagnosis that clarifies the current structure and shows which adjustments are necessary to get to where it is desired. It is not possible to standardize a solution, but there are common aspects that must be considered by all companies.
It is worth remembering that players from regulated segments should, in addition, specific guidance to comply with the standards of the regulatory agent.
Due diligence
Promoting a global organizational diagnosis is a wise choice for companies that are in this process, since it guides the appropriate actions.
Due diligence, a resource widely used also in cases of mergers or incorporations, is an investigation that will bring many answers about the stage of the business and possible risks, giving a real dimension of what must be adjusted for the conduct of the IPO process.
In the accounting and tax fields, reviews of balance sheets, financial statements, accounting, and primary and accessory obligations are performed.
This survey identifies improvements or corrections for the right direction of the business. The result of this work is to understand the business stage, the risks associated with it, challenges and opportunities, essential information strategic decisions base involving an IPO.
Financial and accounting compliance
Going public imposes changes to the financial and accounting function. The company should organize itself to define its policies and practices, which will soon have to meet the requirements and deadlines to report the results. In addition, it is essential to deal with any problems in these fields.
Necessarily, the financial statements for the last three financial years preceding the date of application for registration as a publicly held company must be audited.
The company should be in line with the International Financial Reporting Standards (“IFRS”), another requirement that demand specialized support in accounting. Providing a consultative approach, this support will assist the business in identifying the best way to meet the requirements of B3 and CVM for the offering.
Partnership for the IPO
The DPC's multidisciplinary team is ready to advise businesses on their journey to the IPO. This support includes diagnostics and preparation of the financial and accounting data that will integrate the offer documents, as well as support for questions from legal advisors and auditors.
Before, during or after the IPO, in the most strategic moments or in the operational routine, DPC has a complete portfolio of solutions for its clients' businesses advance and achieve impactful results.
Read here the case: DPC supports 3R Petroleum in M&A and IPO
Author: Luciana Uchôa, partner and director at Domingues e Pinho Contadores.
How DPC may help your company?
Domingues e Pinho Contadores has specialized team ready to assist your company.
Contact us by the e-mail dpc@dpc.com.br
See more
Sign up for our Newsletter:
Are you interested?
Please contact us, so we can understand your demand and offer the best solution for you and your company.
Rio de Janeiro
Av. Rio Branco 311, 4º e 10º andar - Centro
CEP 20040-903 | Tel: +55 (21) 3231-3700
São Paulo
Rua do Paraíso 45, 4º andar - Paraíso
CEP 04103-000 | Tel: +55 (11) 3330-3330
Macaé
Rua Teixeira de Gouveia 989, sala 302 - Centro
CEP 27910-110 | Tel: +55 (22) 2773-3318
