Common Legal Mistakes During the IPO Process and How to Avoid Them

An IPO is a structured process with predictable stages, but it is also unforgiving. Mistakes that would have been minor in a private context become magnified by regulatory scrutiny, broker pressure and a fixed market window. Here are the legal pitfalls we see most often, and how to avoid them.

Mistake 1: Leaving the corporate structure too late

The pre-IPO corporate structure must be IPO-ready. That means a clean parent entity, no problematic intercompany arrangements, all key IP held in the right place, and no orphan shareholders. Restructures take time and can have tax consequences that need to be planned around.

The fix: Engage your legal and tax advisers early to map the existing structure, identify what needs to change, and execute the restructure well before the formal IPO process begins.

Mistake 2: A messy capital table

Pre-IPO investors arrive on different terms over time. Without active management, the cap table can become a tangle of share classes, options, performance rights, convertibles and SAFEs. Brokers and prospective investors do not respond well to complexity.

The fix: Run a cap table review before launching the IPO process. Convert or simplify legacy securities. Consolidate share classes. Document everything properly.

Mistake 3: Underestimating the due diligence process

A proper legal due diligence process is more than a checklist. It identifies issues that need disclosure in the prospectus, fixes that need to happen before listing, and risks that need to be managed.

The fix: Set up a Due Diligence Committee early. Use experienced lawyers who have run IPO due diligence before. Allow real time, not theoretical time.

Mistake 4: Treating the prospectus as a marketing document

The prospectus is a legal document. It must comply with Chapter 6D of the *Corporations Act*. Forward-looking statements need a reasonable basis. Risk factors need to be honestly stated. Statements about competitive position need substantiation.

The fix: Draft the prospectus collaboratively, with the legal team driving the disclosure logic and the corporate adviser shaping the narrative. Resist the temptation to over-claim.

Mistake 5: Misjudging key contracts

Material contracts often have change-of-control or assignment clauses that are triggered by an IPO. Some require counterparty consent. Some can be renegotiated. Some are problematic enough to need disclosure as a risk factor.

The fix: Identify all material contracts in due diligence, review their change-of-control treatment, and address any issues early.

Mistake 6: Underestimating ASX engagement

ASX's role in the listing process is more involved than many first-time issuers expect. In-principle advice, waiver applications and Q&A on listing structure all take time. Novel structures or grey-area issues can delay the timetable significantly.

The fix: Engage with ASX early through your legal team. Get in-principle advice on key structural questions before they become path-blockers.

Mistake 7: Inadequate board readiness

ASX-listed boards face higher scrutiny and stricter governance expectations than private boards. New directors need induction. Existing directors may need new skills. Independence ratios need to be hit. Board committees need to be set up.

The fix: Plan board composition early. Recruit independent directors well before listing. Implement governance frameworks (audit committee, remuneration committee, continuous disclosure policy) well in advance.

Mistake 8: Forgetting that listing is the start, not the end

The work does not stop at listing. Continuous disclosure, AGM cycles, periodic reporting, related party rules, and shareholder communication all begin immediately. Companies that treat the IPO as a finish line are caught off guard.

The fix: Plan post-listing compliance during the IPO process. Have a 12-month plan ready on day one.

How Luma Legal can help

We work with companies preparing for listing, lead managers, and corporate advisers to plan, execute and complete IPOs cleanly. Our role is to anticipate problems, manage the regulatory process, and keep the deal on track.