This means that the success of an IPO should not be measured solely by the amount of capital raised. Its true success lies in the company’s ability to maintain ongoing legal compliance after officially becoming a listed company. The following discussion explains why compliance is an inseparable component of the IPO process, yang juga erat kaitannya dengan peran strategis dari konsultan hukum korporasi dalam mendampingi aksi korporasi emiten.
Understanding That an IPO Creates New Compliance Obligations
An Initial Public Offering (IPO) is the process through which a company offers its shares to the public for the first time. By going public, a company gains access to public funding while becoming subject to the far more stringent regulatory framework governing the capital market.
This change in status carries significant legal consequences. The company is no longer accountable only to its existing shareholders but also to the investing public.
Article 70 of Law No. 8 of 1995 on Capital Markets (“Capital Market Law”) provides that a public offering may only be conducted after the Registration Statement has been declared effective by the competent authority.
Once a company becomes publicly listed, its disclosure obligations expand considerably. Article 86 of the Capital Market Law requires issuers to submit periodic reports as well as disclose any material information that could influence the public’s investment decisions.
These disclosure obligations are far more than administrative formalities. Investors rely on such information to evaluate a company’s financial condition, business strategy, and potential risks.
Accordingly, an IPO should be viewed as the beginning of a broader corporate governance transformation. Oversight structures, reporting systems, legal functions, risk management, and corporate governance practices should all be strengthened before a company enters the capital market.
Common Compliance Risks Before and After an IPO
IPO preparations often focus heavily on valuation and attracting investors. In practice, however, compliance-related issues are among the leading causes of legal disputes after a company is officially listed on the stock exchange.
One of the most significant risks involves incomplete or misleading information contained in the prospectus. Article 78 of the Capital Market Law prohibits any party from providing false statements or omitting material facts in public offering documents.
If such information results in investor losses, Article 80 of the Capital Market Law establishes the possibility of legal liability for parties involved in preparing the offering documents.
Another major risk arises from market manipulation or any conduct intended to create a false or misleading impression of securities trading activity. Article 90 of the Capital Market Law expressly prohibits fraudulent and manipulative practices in capital market activities.
On the other hand, companies lacking an adequate corporate governance framework may also encounter significant challenges after completing their IPO. These may include delayed reporting, weak internal controls, conflicts of interest, and inadequate readiness to comply with ongoing disclosure obligations.
According to Hukumonline, legal risks associated with the IPO process demonstrate that companies entering the capital market without sufficient corporate governance preparation may face legal challenges after becoming public companies. Such risks include violations of disclosure obligations, investor disputes, and administrative sanctions imposed by regulators for non-compliance with capital market regulations.
Post-IPO challenges are influenced not only by market conditions or company valuation. Internal factors, such as weak internal controls, underdeveloped reporting processes, ineffective governance structures, and an insufficiently robust compliance function, are often the primary drivers of increased investor litigation risk, declining market confidence, and operational disruptions for listed companies.
Why Is Legal Due Diligence a Critical Step Before an IPO?
Legal Due Diligence (LDD) is a comprehensive review of a company’s legal condition before it enters the capital market. Its purpose extends beyond satisfying regulatory requirements—it is intended to identify legal risks that could affect the IPO transaction.
In capital market practice, the scope of Legal Due Diligence is extensive. The review typically covers the company’s legal standing, asset ownership, capital structure, material contracts, employment relationships, ongoing litigation, licensing compliance, taxation matters, and intellectual property protection.
The findings of the due diligence process serve as the foundation for preparing the prospectus. Consequently, the quality of the legal review plays a crucial role in ensuring the accuracy of the information disclosed to prospective investors.
Beyond identifying legal risks, Legal Due Diligence also provides companies with an opportunity to address deficiencies before the public offering takes place. Resolving legal issues at an early stage helps reduce the likelihood of disputes after the company becomes publicly listed.
Legal Due Diligence is therefore far more than an administrative requirement. It is a risk mitigation tool that helps ensure a company enters the capital market with a stronger legal and corporate governance foundation.
Compliance Is a Long-Term Investment for Public Companies
An IPO undoubtedly provides access to greater sources of capital. However, the long-term success of a public company depends largely on the strength of its legal compliance and corporate governance practices after its shares begin trading.
Companies that establish a strong compliance framework during the IPO preparation stage are better positioned to earn investor confidence, minimize the risk of legal disputes, and maintain a solid reputation in the capital market.
For this reason, before proceeding with an IPO, companies should ensure that all legal aspects have been thoroughly reviewed through Legal Due Diligence and that every compliance obligation has been carefully addressed.
Frequently Asked Questions (FAQ)
Why is legal compliance essential for a company going public through an IPO?
Legal compliance ensures that a company meets ongoing disclosure obligations, maintains investor protection, and avoids post-listing legal disputes or administrative sanctions under the Capital Market Law.
What are the legal risks associated with inadequate IPO preparation?
Inadequate preparation can lead to misleading prospectus disclosures, violations of reporting obligations, internal control failures, and potential liabilities under Articles 78, 80, and 90 of the Capital Market Law.
What is the role of Legal Due Diligence (LDD) prior to an IPO?
Legal Due Diligence serves as a comprehensive review of a company’s legal status, contracts, assets, and liabilities to mitigate risks, ensure accurate prospectus disclosures, and strengthen corporate governance before listing.
Penutup
Memastikan kepatuhan hukum sejak tahap awal persiapan emisi saham merupakan kunci utama keberlanjutan bisnis perusahaan terbuka di pasar modal.***
Regulations:
- Law No. 8 of 1995 on Capital Markets (“Capital Market Law”). https://regulasip.id/ebooks/1491-undang-undang-republik-indonesia-nomor-8-tahun-19951-tentang-pasar-modal-2db341d1
References:
- Hendrasyah, H. (2025). Perlindungan Hukum Terhadap Investor dalam Initial Public Offering (IPO): Perspektif Aturan Hukum Pasar Modal di Indonesia (Doctoral dissertation, Universitas Kristen Indonesia).
- Gautama, A., Diayudha, L., & Puspitasari, V. A. (2015). Analisa Faktor-Faktor Yang Mempengaruhi Initial Return Setelah Initial Public Offering (IPO). Jurnal Administrasi Kantor, 3(2), 539-550.
- Tim Hukumonline. (2026). IPO Tanpa Kesiapan yang Matang Berpotensi Menjadi Risiko Hukum Jangka Panjang. Hukumonline.
- Sutantoputra, M. W., & Simangunsong, S. (2018). Pedoman Lengkap Legal Due Diligence (LDD) dan Legal Opinion (LO) Dalam Rangka Initial Public Offering (IPO). Penerbit Andi.