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November 4, 2023

Role of Lawyers in Capital Market Transactions in Bangladesh

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Transferring funds from investors to governments and businesses, capital markets are vital to the functioning of the international economy. Attorneys are indispensable in capital market transactions as they offer legal counsel and direction throughout the entire procedure. This article delves into the pivotal function that legal professionals perform in capital market transactions, encompassing the multifaceted legal intricacies that accompany these transactions at each stage.

The Critical Importance of Capital Markets


The primary and secondary markets that comprise capital markets are indispensable for investors, governments, and enterprises. They facilitate the process of acquiring funds, enabling organizations to finance their activities, investments, and expansion. Fundamental elements of capital markets comprise:

Equity markets pertain to the process of raising capital through the issuance of shares (equity), which grants investors ownership interests in companies and the right to become shareholders. Initial public offerings (IPOs) and subsequent share offerings comprise equity markets.

Debt markets encompass the process by which capital is raised through the issuance of debt securities, including bonds and debentures. Issuers receive funds lent by investors in exchange for principal and interest payments on a recurring basis and at maturity.

Derivatives markets encompass the exchange of financial instruments, including options and futures, the valuation of which is derived from tangible assets such as equities, bonds, or commodities.Commodity markets serve as intermediaries for the exchange of tangible commodities, including metals, energy resources, and agricultural products. The function of these markets in hedging and international trade is critical.

Foreign Exchange (Forex) Markets: Currency trading occurs on Forex markets, which facilitate international trade and enable participants to mitigate exchange rate risk.

The Function of Attorneys in Capital Market Exchanges


Legal professionals play a critical role in capital market transactions by delivering legal counsel, performing due diligence, composing documentation, and ensuring adherence to regulatory obligations. In brief, their responsibilities are as follows:

Legal Advisory: Attorneys provide investors, corporations, and underwriters with counsel regarding the legal ramifications of capital market transactions. They assist clients in comprehending the ramifications of various financing alternatives, adherence to securities legislation, and the framework of the transaction.

Due Diligence: In the name of their clients, attorneys conduct due diligence. This entails the examination of financial statements, contracts, and regulatory compliance by issuers. It requires investors to assess the prospective benefits and drawbacks of the investment.

Legal documentation: The legal documents necessary for capital market transactions are drafted and reviewed by attorneys. Prospectuses, offering documents, underwriting agreements, and subscription agreements are all examples of such materials.

Regulatory Compliance: Attorneys ensure that capital market transactions adhere to the securities laws of the federal government and each state. They assist clients in the process of registering securities with the relevant regulatory bodies and securing the required approvals.

On their clients’ behalf, attorneys negotiate the terms of capital market transactions. This encompasses deliberations with investors, underwriters, and other pertinent stakeholders engaged in the transaction.

Disclosure and reporting are responsibilities that issuers are aided in fulfilling by legal professionals. This includes annual reports, periodic filings, and material event disclosures.

Dispute Resolution: Lawyers assume a pivotal role in resolving conflicts that may arise from capital market transactions via negotiation, mediation, arbitration, or litigation, should any disputes or legal issues arise.

Capital Market Transaction Phases


Typically, capital market transactions encompass multiple phases, during which legal professionals are engaged. These phases consist of:

Preparation and Planning: During this phase, the objectives of the transaction are established, the securities to be issued are determined, and the offering’s structure is devised. Legal counsel regarding the regulatory framework and compliance obligations is rendered by attorneys.

Due Diligence: In order to evaluate the issuer’s financial and legal health, attorneys conduct due diligence. They conduct an examination of contractual agreements, financial statements, and legal responsibilities in order to detect possible hazards.

The drafting of essential legal documents, such as the prospectus or offering memorandum, is the responsibility of attorneys. These documents comprise critical details pertaining to the issuer, the offered securities, and the transaction’s conditions.

Obtaining regulatory approvals, including securities registration and approval from regulatory bodies like the Securities and Exchange Commission (SEC) in the United States, is a task that legal professionals undertake on behalf of their clients.

Marketing and Promotion: Attorneys collaborate with issuers and underwriters to ensure that promotional materials and materials adhere to the regulations and laws governing securities. This entails the evaluation of promotional and sales materials.

Legal professionals engage in deliberations pertaining to the pricing and allocation of securities. They assist in the determination of the offering price and the distribution of securities to investors.

Closing and Settlement: Attorneys ensure compliance with all legal requirements by supervising the closing of the transaction. In this phase, securities and funds are transferred between the involved parties.

Post-Offering Compliance: Attorneys maintain their involvement in guaranteeing continuous adherence to regulatory obligations, such as reporting responsibilities, subsequent to the conclusion of the transaction.

Legal Intricacies Associated with Capital Market Transactions


The realm of capital market transactions is governed by an intricate network of legal regulations. Among the most significant legal complexities are the following:

Adherence to both federal and state securities laws is of the utmost importance. Attorneys ensure that all offerings meet the requirements for registration or exemption.

Anti-Fraud Provisions: Fraud and misrepresentation are prohibited by securities laws. Attorneys assist issuers in providing investors with accurate and exhaustive information.

Disclosure Obligations: Investors are entitled to a substantial amount of information from issuers, and the preparation of comprehensive disclosure documents is aided by legal professionals.

Sarbanes-Oxley Act: The Sarbanes-Oxley Act imposes additional reporting and governance requirements on public companies; compliance is ensured by attorneys.Cross-border capital market transactions entail supplementary intricacies on a global scale, encompassing adherence to foreign securities legislation and regulatory bodies.

Regulatory Changes: Due to the ever-changing legal requirements and regulations governing capital markets, it is crucial for attorneys to remain current on legal developments.

To conclude


Advocates serve a critical function in capital market transactions by liaising with clients through the intricacies of investing in the global marketplace and ensuring adherence to legal regulations. Their proficiency in dispute resolution, document drafting, securities law, and due diligence is crucial for preserving the integrity and effectiveness of capital markets.

Lawyers will continue to play a pivotal role in facilitating successful capital market transactions and upholding the confidence and trust of issuers and investors as the legal environment continues to evolve.

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