Strictly Private & Confidential2
Connected Transactions
SEC
Consideration Points
Incentive to Transfer Benefit
of Existing Shareholders
Transaction Frequency
Transaction Size
Type of Transactions
Transaction Size to NTA
Approval Bodies
Consideration Points
SET/SEC
Approval Process After IPO Duty
Concern of Conflict of Interest from Connected Transactions
Transactions between listed company and other companies having the same following persons are regarded as connected transactions
• Management
• Major shareholders
• Persons having control over company
• Related persons of above
Transactions between listed company and its persons listed above
The connected transactions can exist if transparency and good governance are set up to protect minority shareholders from conflict of
interest and benefits transfer
Strictly Private & Confidential3
Financial Statements Preparation
Applicant’s Financial Statements for the last year and the last quarter before submission of the application to SET must conform to the
followings
(1) Financial Statements are prepared in accordance with i) general accepted accounting principles (GAAP) that are applied to public companies
and ii) other requirements according to section 56 of SEC rules
(2) Financial Statements are audited /reviewed (in case of quarterly financial statements) by CPAs, approved by SEC to audit listed companies. The
audit/ review has to be conducted in accordance with the applicable auditing standards.
(3) Type of auditor’s opinion in the report of independent auditor according to cannot be any of the followings
(a) Disclaimer of Opinion or Adverse Opinion
(b) Qualified Opinion; that some transaction was not treated in accordance with GAAP is quoted as the reason for qualifying
(c) Qualified Opinion; the limitation of scope is quoted as the reason for qualifying
Ref: Notification of Capital Market Supervisory Board TorChor 39/2559 “Application for and Approval of Offer for Sale of Newly Issued Shares”
201820172016
F/S for the fiscal year and for the quarter before IPO have to be audited/ reviewed by an auditor approved by SEC
IPOMust
IPOMustShould Be
For Illustration Only
Strictly Private & Confidential4
Internal Control
Internal Control and Accounting System
Lawyer Accountant Industry Expert
Audit Committee
Evaluate the adequacy of the company’s internal
control system before IPO and once a year thereafter.
The company’s external auditor
cannot take a job as the evaluator
of the internal control system
Internal Control Specialist evaluate the
adequacy of the company’s internal control system
Segregation of Duties & Documentations
Strictly Private & Confidential5
Internal Control (Cont’d)
Audit Committee : Qualifications Vs. Duties and Responsibilities
Qualifications
1. Appointed by the Board of Directors and shareholders
2. Consist of at least 3 members, each of which has to be independent i.e.
Has no more than 1% of voting shares in the Company, its subsidiaries, and its associates;
Do not hold a position as a full time employee/advisor of the Company, its
subsidiaries, its associates, and other connected entities; and
Has no family relationship with or being a spouse with connected persons
leading to independency.
3. Has sufficient knowledge and experience to review the reliability of the
financial statements
4. Require at least 1 audit director having finance and accounting background
Recommended Structure
Lawyer Accountant Industry Expert
Duties & Responsibilities
1. Review the sufficiency, consistency and credibility of the financial report
2. Review the adequacy and effectiveness of internal control and audit systems
3. Review the compliance with the public Act., the SEC Act., regulations of the SET and the relevant regulations.
4. Consider or approve the compliance with all disclosures of the connected transaction or the conflict of interest transaction.
5. Acknowledge the accountability of financial information in the annual report
Strictly Private & Confidential6
Preliminary Solutions
Issues Description Possible Solutions
Related Party
Transaction
To protect conflict of interest, the listed company and
subsidiary is required to disclose the related
transaction
The Company needs to disclose the related party
transaction in filing. With subjecting to due diligence,
Financial Advisor may advise appropriate structure for
listing
The related party transactions as arm-length basis
need to agree on market terms and conditions
Related Business for
Listing
To protect the conflict of interest, the Company and
subsidiaries, which has a similar business and/or
provides the integrated business, shall be consolidated
for listing
Subject to further due diligence, Financial Advisor will
advice an appropriated business group structure for
listing
Internal Control System To provide the best interest for shareholders, the
Company shall have an effectiveness of internal
control system
The Company shall employ Internal Auditor to evaluate
the adequacy of the company’s internal control system
before IPO and follow an annual audit plan thereafter
Financial Statements To comply with SEC and SET’s regulations, financial
statement of the Company shall be audited/reviewed
by CPAs, approved by SEC to audit listed companies on
PAE accounting basis (Public Accountable Entities)
The Company is required to provide consolidated
financial statement on PAE accounting basis
Strictly Private & Confidential8
SEC Approval CriteriaQualitative Requirements Key Tasks/ Action Plan
Company Status Must be a public company limited The Company to call for BOD meeting and shareholder meeting
to get the approval on the conversion into Public Company
Limited
Required special resolution for transformation to public company limited (super majority vote (75% or more) is required)
Application and Approval
A public company limited wishing to IPO its shares shall file an
application filing together with supporting documents with SEC (to
be jointly prepared by financial advisor whose name approved by SEC)
The Company to engage
– Financial advisor to prepare relevant documents (i.e. filing,
marketing material for placement, etc)
– Legal advisor to prepare the require documents (i.e. listing
application, filing, amendment of corporate documents (if
any), etc)
Financial Advisor
Financial advisor must meet qualifications determined by SEC and under SEC approved lists
Selected the financial advisor whose name is under SEC approved lists
Management Qualifications of management and controlling persons should be in
line with the SEC regulations and they should not possess any characteristics prohibited by the SEC
The Company and its legal advisor to check qualifications of
management whether require any amendment of composition of BOD
Corporate Governance
Must demonstrate good corporate governance with qualified audit
committee
At least 1/3 of directors (but not less than 3) must be independent
directors
Establish audit committee consisting of at least 3 persons, one of
whom must have knowledge in finance and accounting
Independent director shall comply with the following:-
– Must not be management, employee, or consultant that
receives monthly payment from the Company
– Must be free of any financial or other interest in the company's
management and business
– Holding share not exceeding 1% of total number of shares in the
company, its parent company, subsidiary company, associate
company
The Company to call for BOD meeting and shareholder meeting
to approve on
– Appointment of Audit Committee and independent directors
– Specify the scope, roles, duties, and responsibilities of Audit Committee and independent directors
Strictly Private & Confidential9
SEC Approval Criteria (Cont’d)
Qualitative Requirements Action
Accounting and
Financial
Statement Preparation
Financial statements (F/S) comply with public company and SEC
guideline
Auditor must be approved by SEC
The audited F/S shall not express i) disclaimed opinion on F/S or
adverse opinion and ii) qualified opinion due to any material
accounting particular
The Company to engage auditor for
– F/S preparation to comply with Thai Financial
Reporting Standards for Publicly Accountable Entities
Internal Control Internal control system must be established The Company to engage internal control evaluator for
– Internal control review and establishment
Article of Associations
Article of Associations must reflect fairness and governance over related party transactions
Engage legal advisor for the review and preparation of all
required documents to comply with the related rules and
regulations to amend Article of Associations
Conflict of Interest
& Shareholding Structure
No conflict of interest among group affiliates and major shareholders
Fair and full disclosure of potential related party transactions
No shareholder and management structure of which shall be
prejudicial to minority shareholders
Financial advisor and legal advisor to
– Evaluate current corporate and conflict to interest
– Restructure group holding structure (if any)
Disclosure of Information
The information disclosed to public must not demonstrate reason to
doubt incomplete, and inadequate in making investment decisions or
contain misleading statements to investors
Disclose the latest accounting year and the most recent quarter of
financial statements prior to the filing of application
Financial advisor and legal advisor to assist the Company
to comply with relevant rules and regulation and for the
best interest of the shareholders of the Company as a
whole in disclosing the Company information in filing and prospectus
Provident Fund Must be established prior to the date of application Engage asset management company to establish provident fund for the Company’s employees
Strictly Private & Confidential11
IPO Work Plans
Module Estimated time Major work plans Responsible Parties Key deliverables
Internal Control Up to 5-6 months
(can be done in parallel with module 2-5)
Internal control evaluation
Internal control development
Financial Advisor
Internal Auditor
Internal audit report
Internal control sufficiency form
Legal, and
commercial due diligence
~5-6 months Due diligence the Company’s
information
Management interview
Developing 3-5 years business plan
and financial projection
Financial Advisor
Legal Advisor
Financial advisor work paper or
supporting documents
The Company’s business plan and financial forecast
Financial model,
projections and valuation
~3 months Conduct financial model based on
the Company’s information and management interview
Financial Advisor
Auditor
The Company’s preliminaryvaluation
Corporate Formality ~1-2 months Call Board meeting and shareholders’
meeting
Preparation of BOD and EGM minutes
of meeting
Appointment of BOD, independent directors and sub-committee
Financial Advisor
Legal Advisor
BOD/EGM minute of meeting,
and other relevant documents
The Company become a public company limited
1
2
3
4
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IPO Work Plans (Cont’d)
Module Estimated time Major work plans Responsible Parties Key deliverables
SEC/SET documents preparation
~4 months Filing and draft prospectus Financial Advisor
Legal Advisor
Internal Auditor
Auditor
Filing (69-1)
Other SEC documents as
required
Other SET documents as required
SEC/SET processes Within 165 days Company visit by SEC and SET
Correspondence with SEC & SET for their queries
Financial Advisor
Legal Advisor
Internal Auditor
Auditor
SEC to approve application and
filing
SET to approve the listing of shares
Placement process ~2-3 months Construct attractive equity story and
positioning
Estimate potential demand and
indentify target investors
Tranching and allocation of the
offering
Educate investors on the Company’s
equity story and establish demand
momentum for the offering
Preparation of marketing materials
Organize premarketing and
roadshows Bookbuild and finalize the IPO price
Financial Advisor
PR Consultant
Analyst presentation(s)
Research reports
Roadshow materials
Other documents related to
placement process
Successful and fully subscribed
of the Company IPO
5
6
7
Strictly Private & Confidential13
Indicative IPO Timeline
W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4
Month 6Month 1 Month 2 Month 3 Month 4 Month 5 Month 13Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Commercial and legal due diligence
BOD to approve FS, RPT, internal control evaluation, PCL conversion
and other related IPO agendas
Financial projection and valuation
Submit SEC and SET application
SEC Consideration Period (within 165 days)
Draft filing
1st trading day
SEC approve filing
Kick-off
Corporate Governance Preparation
Update valuation
EGM to approve on PCLconversion
Corporate Restructuring
Internal audit system preparation
Appoint internal auditor
BOD to approve filing and listing application
Note : The tentative timeline is subject to change as per further due diligence and SEC /SET consideration period
Appoint external auditor & legal advisor
Bookbuilding
Analyst Meeting
Marketing & Roadshow
Subscription Period
Filing Updates
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SEC Approval Process
Pre-consult
Submit SEC and SET
application
Approx. 30-45 days
SEC review working paper of FA and auditor
SEC/SET
company visit
Within 30 days
Company/FA to submit
minute of meeting from
company visit and all
relevant documents
Within 120 days:
Count Day 1
120 days 45 days
SEC internal
consideration process
Effective filing
Completed part 3 information relating
to the offer of securities
(IPO price and allocation)
SEC approve
filing
First day trade
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Preliminary Due Diligence Request List
No. Information & document
(1) Company & Business
1.1 Copy of Memorandum of Association
1.2 Copy of Certificate Registration of Company
1.3 Copy of Article of Association
1.4 Copy of Shareholders List
1.5 Copy of Board of Directors' meeting minutes / memo
1.6 Copy of Shareholders' meeting minutes / memo
1.7 Copy of current Group Structure
1.8 Copy of Shareholders Agreement (if any)
1.9 Copy of Share Purchase Agreement (if any)
1.10 Company profile, brochures, and other introduction booklets
1.11 Company annual report (if any)
1.12 Most recent business plan (any formats are acceptable)
1.13 Key business developments/milestones
(2) Industry & Products
2.1 List of products and services including type and price
2.2 List of top 10 customers and suppliers by value and % of total value
2.3 Description of key businesses and operating structure such as business flow diagram
2.4 Copy of all relevant permits, licenses, consents, orders or authorizations from regulatory authorities
2.5 Copy of quality management system certificates e.g. ISO
2.6 Copy of awards or commendations
2.7 Relevant industry research, journals and publications on industry trend/ government policies and regulation (if any)
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Preliminary Due Diligence Request List (Cont’d)
No. Information & document
(3) Operational/ Technical
3.1 Flow of production process of types of products/ services
3.2 List of name plated capacity, maximum capacity, actual capacity of each service
3.3 List of factory and office with location, capacity and products/service
3.5 Feasibility or technical reports which are relevant to the business (if any)
3.7 Key historical performance measure
3.8 Maintenance scheduled/plan
3.9 Major unplanned shutdown or maintenance record with reasons behind
3.10 The Company’s budget vs. actual performance (if any)
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Preliminary Due Diligence Request List (Cont’d)
No. Information & document
(4) Commercial Agreement & Other Agreement
4.1 Copy of all commercial agreements with key customers/suppliers/sub-contractors
4.2 Copy of all sales, agency, distribution and advertising contracts
4.3 Copy of all agreements relating to joint venture, partnership and equity or debt investments (if any)
4.4 Copy of all agreements or contracts with potential connected person (if any)
4.5 Copy of relevant financial agreements e.g. loan agreement, financial lease, currency hedging , etc.
4.6 Copy of all insurance policy
4.7 Copy of all tax filing at Revenue Department Corporate Income Tax, VAT, WHT, etc.)
4.8 Copy of all internal control manual, work procedure, all standard operating procedure (SOP)
4.9 All licenses, permits, approvals, orders, authorizations, consents and the like issued or granted by applicable governmental or regulatory
authorities to the Company and any significant correspondence related thereto (if any)
4.10 All reports to or correspondence with any governmental authorities/bodies with respect to the operations (if any)
4.11 All reports, notices or correspondence with any governmental authorities relating to any purported violation or infringement from any government
regulations (if any)
4.12 Recent assets appraisal reports (if any)
4.13 List of all patents (including patent applications), trademarks, trade names, service marks and copyrights owned or used by the Company granted
by any jurisdiction and all products or applications of technologies based thereon or related thereto
4.14 Documents evidencing any patent, trademark, trade name, service mark, copyright, license or other contract right owned or used by the Company
4.15 BOI/ Tax & Investment Privilege Approval Letter, certificate, operating confirmation
4.16 Copy of all agreements to purchase or sell real property/key assets at some future date
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Preliminary Due Diligence Request List (Cont’d)
No. Information & document
(5) Management & Employment
5.1 Copy of organization chart - please describe each functional responsibilities
5.2 Authorities of the management
5.3 Head count of each department
5.4 CV of Management, Controlling Person and Audit Committee (if any)
5.5 Copy of employment agreement (standard form)
5.6 Copy of employee guideline
5.7 Copy of Provident Fund setting up
5.8 Details of past employee disputes
5.9 Details of employee benefits, training programs, welfare etc.
5.10 Details of any bonus, retirement, profit sharing, and incentive compensation of management
(6) Auditors and Internal Control
6.1 Auditors' annual management letters and management responses
6.2 Company representation letters provided to auditors with respect to the last five fiscal years (if any)
6.3 Non-publicly filed internal control reports prepared by management and the Company’s auditors and related documents
6.4 Audit Committee policies and procedures such as AC checklist, business control audit plan and business control audit process, committee member
and responsibility (if any)
6.5 All letters or reports from auditors to the management of the Company regarding control systems, methods of accounting, etc., and all of
management’s responses thereto, for the last 5 yr
6.6 Significant tax records of the Company, including reports issued in connection with any government tax audit, tax sharing or tax allocation
agreements and letters from auditors regarding tax issues for the last five years
6.7 List of material pending tax issues
Strictly Private & Confidential20
Preliminary Due Diligence Request List (Cont’d)
No. Information & document
(7) Financial Information
7.1 Copy of audited financial statement of the company and all subsidiaries
7.2 Financial model of each business (if any)
7.3 Copy of management accounts
7.4 Copy of trial balance (if available)
7.5 Copy of recent tax return form - please illustrate accumulative tax loss carried forward (if any)
7.6 Break down sale by distribution channel
7.7 Break down sale by products/service and by key customers
7.8 Breakdown of cost of goods sold by products/service and by key customers (if available)
7.9 Breakdown of SG&A
7.10 Details of assets used in the business of the company and subsidiaries, which are not owned by the Company
7.11 Break down account receivable
7.12 Break down account payable
7.13 An aging of account receivable
7.14 An aging of account payable
7.15 A list and details of all notes receivable and other debtors (amount, terms and conditions)
7.16 A list and details of all notes payable and other debtors (amount, terms and conditions)
7.17 A list of fixed assets by category - please indicate year of purchase, cost, and depreciated book value and proof of ownership
7.18 A list of all loans, borrowings, debt securities outstanding, and credit line (amount, terms and conditions)
7.19 Management Letter (if any)
7.20 Details of related party transactions of the Company and all subsidiaries , including amount and nature of the transactions
7.21 Excel spreadsheets used to create audited financial statements and breakdown
Strictly Private & Confidential21
Preliminary Due Diligence Request List (Cont’d)
No. Information & document
(8) Capital Budgeting
8.1 Detailed breakdown of 5-year plan
- Breakdown sales budget by product category
- Breakdown cost of sales budget
- Marketing and selling expense budget
- General and administrative expense budget
- Breakdown capital expenditure budget (CAPEX) with description of project detail (including benefits), current status and expected operation
date
- Financing plan and budget
8.2 Detailed financial projections and key assumptions in arriving at budget projection
8.3 Feasibility report of new planned project
(9) Litigation
9.1 A list of all pending litigation, arbitration proceedings, or governmental investigations and proceedings relating to the Company, including
descriptions of parties, damages, and other remedies sought, nature of action
9.2 All pleadings and other important documents relating to litigation, arbitration and governmental proceedings relating to the Company