LIC IPO: Govt amends fee structure for legal advisors after failed attempt

DIPAM introduces "milestone payments" in RFP; the legal advisors were earlier supposed to get their fee "after successful and satisfactory completion of the transaction"

After the first attempt to appoint legal advisor for the initial public offering (IPO) of Life Insurance Corporation of India (LIC) failed, the government has amended the fee structure for law firms to make the offer attractive. 

The Department of Investment and Public Asset Management (DIPAM) has introduced “milestone payments” by amending its request for proposal (RFP) for engagement of legal advisors for the LIC IPO. Earlier, the legal advisors were supposed to get their fee “after successful and satisfactory completion of the transaction”.

Now, the successful law firm will receive 50 per cent of the fee after filing of the Draft Red Herring Prospectus (DRHP) and the remaining half of the fee post listing of LIC’s shares on the exchanges. Interested law firms can quote their fee which can be a minimum Re 1. 

The changes come after the government did not receive adequate response from law firms for assisting in the LIC IPO. The government has floated a new RFP to appoint a legal advisor, and has specified that the time limit for validity of the financial bids shall be three years implying that the law firm will assist LIC and the government for three years from the time of placing the bid. The previous bid document had stated bidders cannot prescribe any time limit for validity of the financial bid, keeping the timeline of their work open-ended.

Law firms will have to submit their bids by September 16. Legal advisers are required to submit a proposal in a consortium with an international law firm with similar experience and expertise in public offerings in capital markets. The international law firm, with whom domestic law firms would tie up, should have the experience of managing Indian capital market transactions as advisers or underwriters.

The selected law firm will have to prepare the DRHP, Red Herring Prospectus and the final prospectus for filing with the Securities and Exchange Board of India (Sebi) and the stock exchanges. It will also have to draft responses to queries related to the IPO received from Sebi, exchanges, depositories, Insurance Regulatory and Development Authority of India (Irdai) until the completion of all activities relating to public offering.