Introduction
An Initial Public Offering (IPO) is a major milestone in a company’s journey. It marks the shift from being a private business to becoming a publicly listed one, which brings greater visibility, regulatory oversight, and responsibility. While going public is often seen as a moment of success, the process leading up to it, especially if delayed, can be complex and demanding, and calls for careful oversight by the company’s leadership.
Delays in IPO timelines are more than just setbacks in the scheduling; they create governance challenges that require the Board’s close attention. Whether the delay is due to regulatory comments, market conditions, or the company’s own preparedness, it increases the period during which sensitive information keeps generating within the company. This increases the risk of insider trading and heightens the importance of the Board’s fiduciary duties under the Companies Act, 2013, and compliance responsibilities under SEBI regulations. In such situations, proactive measures like forming an IPO Steering Committee with legal oversight can help maintain control, ensure transparency, and guide the company through the complexities of a prolonged IPO process.
In this article, we explore how directors can navigate their fiduciary responsibilities during IPO delays, manage insider trading risks effectively, and how establishing an IPO Steering Committee can add significant value.
Board’s Fiduciary Responsibilities Amidst IPO Delays
Under Section 166(2)[1] of the Companies Act, 2013, directors are duty bound to act in good faith, promoting the company’s objectives and acting in the best interests of the company, its employees, shareholders, and the community. These duties persist throughout the IPO process, including periods of delay.
During extended IPO timelines, new developments such as financial results, strategic decisions, or regulatory communications may arise. SEBI’s Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2018 mandate prompt disclosure of all material developments between the filing of the draft offer document and the allotment of securities[2]. If such information is not disclosed, the company and its officers may face liabilities under Sections 34 and 35 of the Companies Act, 2013, which deal with false or misleading statements in a prospectus. SEBI has also taken enforcement action in the past against companies for providing inaccurate information in their draft offer documents.
Therefore, when an IPO gets delayed, the Board of Directors of such company must not treat it as a passive waiting period it must proactively assess if any new developments have occurred that warrant disclosure and ensure that timely updates are incorporated in the offer documents to avoid regulatory breaches.
For Example: The Quadrant Future Tek Case
A recent settlement order[3] (April 01, 2025) involving Quadrant Future Tek Limited highlights the Board’s continuing responsibility to oversee disclosures even during IPO delays. In this case, a promoter-to-promoter gift of shares occurred after the filing of the DRHP but was disclosed well beyond the 24-hour timeline mandated under Regulation 54[4] of the ICDR Regulations. Although the transaction was non-commercial and did not alter the overall promoter holding, SEBI still pursued enforcement action for delayed disclosure underscoring that all material transactions during the IPO window must be promptly and transparently disclosed. This case serves as a reminder that the Board must stay alert during prolonged IPO processes and ensure that even seemingly routine or internal developments are evaluated for disclosure obligations.
Managing UPSI and Insider Communication Risks Post Draft Offer Document Filing
Once a draft offer document is filed with SEBI, the company comes under the purview of “to be listed company” and the definition of the UPSI inter-alia becomes applicable. Information in the company gets categorized into material information and price sensitive information. As per PIT this price sensitive information has to be ring fenced and person having access UPSI are subject to code of conduct.
Regulation 3(1)[5] of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) clearly prohibits any insider from communicating, providing, or allowing access to UPSI to any person, including other insiders, except where such communication is in furtherance of legitimate purposes, the performance of duties, or the discharge of legal obligations.
In support of this, Regulation 3(5) of PIT Regulations requires companies to maintain a structured digital database (SDD) containing the names of such persons with whom UPSI is shared. This database must be time-stamped and should ensure that any sharing of sensitive information is traceable and auditable.
These safeguards become especially important because Regulation 4(1)[6] of the Insider Trading Regulations assumes that if an insider trades while they are in possession of UPSI, it is presumed that the trade was based on that information. In other words, the insider is considered guilty unless they can prove otherwise.
After filing DRHP the key managerial personnel and board members to merchant bankers, legal advisors, and auditors etc. gain access to a load of Unpublished Price Sensitive Information (UPSI). This includes financials, business strategies, regulatory correspondences, and risk disclosures that are not yet available in the public domain. Hence the board of directors need to be more careful and cautious to avoid violation of the PIT regulations.
During long IPO processes, where new sensitive information keeps coming, up the chances of insider trading, whether intentional or accidental, become much higher. This makes it essential for companies to have strict internal controls and regular monitoring in place and making the designated persons aware of the obligations.
One effective way to institutionalize this vigilance is by establishing an IPO Steering Committee with legal oversight, which can centrally manage disclosures, UPSI tracking, and stakeholder coordination throughout the IPO.
Establishing an IPO Steering Committee with Legal Oversight
Given the complexities of the IPO process, forming an IPO Steering Committee may provide structured oversight. While not mandated by law, such a committee can facilitate coordination between various stakeholders, including management, legal advisors, and merchant bankers.
Typically, such a committee should be constituted soon after the IPO process is initiated, ideally at the time of appointing merchant bankers or finalizing the DRHP outline and should remain in place until the allotment of securities and successful listing on the stock exchange. In some cases, it may be advisable to extend the committee’s oversight until post-listing compliances under SEBI LODR Regulations are fulfilled.
The committee’s responsibilities may include:
- Monitoring the progress of IPO documentation and responding to SEBI queries as per Regulation 25(4) and (5)[7] of the ICDR Regulations.
- Ensuring timely disclosure of material developments in line with Schedule IX of ICDR Regulations.
- Overseeing compliance with insider trading regulations, including the maintenance of structured digital databases under PIT Regulations.
- Coordinating updates to financial statements, ensuring compliance with disclosure requirements.
Conclusion Delays in IPO timelines are not merely pauses in the process but periods that test a company’s commitment to governance and compliance. The Board’s active engagement, adherence to fiduciary duties, and proactive risk management are crucial during these times. By establishing an IPO Steering Committee with legal oversight, companies can navigate the complexities of extended IPO processes, maintain regulatory compliance, and uphold investor confidence
[1] Section 166(2) of Companies Act, 2013: A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.
[2] SCHEDULE IX of ICDR – public communications and publicity materials: (4) The issuer shall make a prompt, true and fair disclosure of all material developments which take place between the date of filing offer document and the date of allotment of specified securities, which may have a material effect on the issuer, by issuing public notices in all the newspapers in which the issuer had released pre-issue advertisement under applicable provisions of these regulations;
[3] https://www.sebi.gov.in/enforcement/orders/apr-2025/settlement-order-in-respect-of-mr-mohan-krishnan-abrol-quadrant-future-tek-limited-and-mr-vivek-abrol_93200.html
[4] The issuer shall ensure that all transactions in securities by the promoter and promoter group between the date of filing of the draft offer document or offer document, as the case may be, and the date of closure of the issue shall be reported to the stock exchange(s), within twenty four hours of such transactions.
[5] Regulation 3(1) of PIT Regulations : 3. (1) No insider shall communicate, provide, or allow access to any unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, to any person including other insiders except where such communication is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.
[6] No insider shall trade in securities that are listed or proposed to be listed on a stock exchange when in possession of unpublished price sensitive information……
[7] Regulation 24 of ICDR Regulations:
(4) The lead manager(s) shall call upon the issuer, its promoters and its directors or in case of an offer for sale, also the selling shareholders, to fulfil their obligations as disclosed by them in the draft offer document and the offer document and as required in terms of these regulations.
(5) The lead manager(s) shall ensure that the information contained in the draft offer document and offer document and the particulars as per restated audited financial statements in the offer document are not more than six months old from the issue opening date.