Capital raises are often approached with a primary focus on how much to raise, at what price, and from whom. However, the success of a capital raise may be impacted by a number of matters. For boards and potential investors, a capital raise is a moment of scrutiny. It tests governance discipline, regulatory readiness, and investor trust.

As a partner at the law firm Myers, Fletcher & Gordon, I have assisted clients in various capital market transactions such as initial public offerings, offers for sale of shares in listed entities, mergers and acquisitions of listed companies, and private placements. I also hold a postgraduate diploma in corporate governance and various certificates in understanding and interpreting financial regulations and laws and compliance, ethics and corporate governance.

Based on my experience, the following are common missteps that should be avoided.

1. The Time at Which the Attorney is Engaged

It is important to engage professional advisors including attorneys as early as possible. Where an attorney is engaged after commercial terms are agreed, this leaves little room to address structural, regulatory, or governance weaknesses that later delay approvals or dilute deal value. Attorneys can flag commercial issues such as clauses which may be unenforceable, tax implications of certain process flows, changed in timelines due to agreed conditions precedent, completion deliverables and conditions subsequent. Legal advisers add the greatest value when involved before commercial terms are finalised, allowing governance, regulatory classification, and approval pathways to be addressed proactively rather than reactively.

2. Understanding Governance Requirements

Companies are governed primarily by the Companies Act and their Articles of Incorporation (or other constitutive documents). Many do not appreciate the steps that must be taken under the law and its articles before a capital raise can take place. This includes adequate resolutions, addressing any pre-emption rights, obtaining waivers and adhering to other constitutional requirements. Failure to comply with these requirements can impact the timing of a capital raise and likewise cause delays in regulatory approvals. Clear, comprehensive board and shareholder resolutions which are aligned with constitutional documents and regulatory expectations reduce execution risk and prevent avoidable delays.

3. Failure to Provide Adequate Related Party Disclosures

Companies can often give vague related party disclosures or fail to disclose the relation with a party to a material contract of the business. Capital raises involving controlling shareholders (direct or indirect) regularly falter where conflicts are not clearly identified, independently assessed, and transparently disclosed. In any related party set-up investors and regulators want the clearest picture to understand the dynamic with the company and to ensure all acts are being done in the best interest of the company, and not the best interest of the related party. Where related party disclosures appear vague, this may leave investors with more questions than answers. Related-party dynamics should be identified early, and transparently and thoroughly disclosed, with appropriate board oversight to protect both perception and value.

4. Timing of Audited Financials

An underestimated pitfall for capital raises in Jamaica is the timing and availability of audited financial statements. For an initial public offering, issuers must meet stringent audit and reporting requirements over multiple financial periods, with audited accounts that are current, compliant, and capable of withstanding regulatory and investor scrutiny. Even for private placements, where requirements are typically less onerous, investors increasingly expect recent audited or independently reviewed financials before committing capital. In practice, transactions frequently stall where companies underestimate the time required to complete audits, address qualifications, or resolve accounting issues. These delays are often compounded by capacity constraints within the auditing profession and peak reporting cycles. From a legal standpoint, misalignment between financial readiness and the intended capital-raising route can materially delay execution, erode investor confidence, and force issuers to reconsider transaction structure late in the process.

5. Agreeing to Unrealistic Reporting Requirements

Many companies, in a haste to obtain capital, often agree to unrealistic reporting requirements. This includes the time period for providing audited and unaudited financials and other reports or certificates which provide evidence of compliance with agreed covenants. Where a company is not used to tracking and handling these events in a timely manner it may result in potential defaults in relation to its capital raise. It is for this reason strong governance is not ancillary to capital raises, it is foundational. Companies should be honest in their assessment in agreeing to various reporting timelines, for example providing audited financials within 150 days rather than 90 or 120 days.

My experience in Jamaican capital market transactions has shown me that the pitfalls which delay or derail capital raises are rarely unpredictable and are often avoidable. The capital raises that succeed are those where legal, governance, and commercial considerations are aligned from the outset, and where risks are anticipated and addressed before they erode value.

Shaniel May Brown is a partner at Myers, Fletcher & Gordon, and is a member of the firm’s Commercial Department. Shaniel may be contacted via shaniel.maybrown@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.