Listing of Securities in Stock Exchange: Requirements and Obligations
Understanding the process of listing securities in a stock exchange involves fulfilling specific conditions before listing, such as offering shares to the public and having a broad-based capital structure. Obligations post-listing include paying annual listing fees, complying with exchange regulations, and submitting necessary reports. Listing enhances marketability, liquidity, and investor protection, ensuring fair trading of securities.
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LISTING OF SECURITIES Ms. Aleena Raju Department of Business Administration
Listing of Securities/Shares Listing means the admission of the Securities of a Company to trade in a Stock exchange. The main objective of listing marketability and impart liquidity and free negotiability to stocks. Also the purpose of listing is to protect the interest of the share holders and the general investing public. The Stock exchange offers for listed securities, an open auction market where buyers and sellers meet on terms of perfect equity and discover the true price. is to provide ready
Conditions for Listing Before listing the Securities, a Company has to fulfill the following conditions: Shares of companies must be offered to public through prospectus and minimum 25% of each class of securities must be offered. The Capital structure of the company should be broad based and there should be public interest in securities. The minimum Issued Capital must be 3 crores, of which 1.80 crores must be offered to the public. There must be at least 5 share holders for every 1 lakh of fresh issue of capital
Conditions for Listing A Company with the paid up Capital of more than 5 crores should list in more than one Stock exchange. The auditor or Secretary of the Company must give a declaration that the share certificate will be stamped so that the shares of the promoter cannot be sold or transferred for a period of 5 years.
Listing Obligations Every listed company will have to fulfill the following obligations as per the listing agreement.
Listing Obligations Annual listing fee - determined on the basis of capital of the company as on 31 March. Comply with the rules, byelaws and regulations of the Stock exchange Notice of Board meetings Inform the exchange in advance including the agenda. Inform book closure notice before 42 days or time period fixed by the exchange.
Listing Obligations Submission of reports to the exchange (a) Profit & Loss account, Balance Sheet, Directors report (B)Notices, resolutions, circulars relating to new issue of capital prior to its dispatch to the share holders. (c) Copy of the proceedings at Annual General meeting, Extraordinary general meeting. (D) Copies of all notices, circulars issued or advertised in the press. Publication of periodical interim statements earnings. about the working and earning Issue of shares- Allotment method to be approved by the exchange.
Listing Obligations 8. Information of events - Strikes, lockouts, closure on account of power cuts, litigation with material impact, revision in the credit rating symbols, other information having a bearing on the operation/performance of the company. 9. Unaudited financial results to be communicated. Quarterly basis, within one month from the end of the quarter. 10. Insistence of corporate governance - Include a separate section on corporate governance in the Annual Report of the company. Company must furnish a certificate from either the auditors or company secretary regarding compliance of conditions of corporate governance as stipulated in clause 49 of the listing agreement
Benefits of Listing A Company can raise capital easily by listing its shares in the stock market. Listed Securities enjoy wider market. Listing helps its shareholders to diversify the risk. Banks prefer listed Company Securities as collateral security for loan . A wide publicity is given as the prices are quoted in newspapers, television and magazines. Good advertisement for the company.
Listing Obligations The interest of the investors is protected as the Stock exchange regulates the Company. Investor can easily convert his shareholding into cash. Investor can take rational buy/sell decision after reading the developments taking place in the company from the stock exchange information.
Defects in Listing Listing does not give guarantee for the securities of the company. Listing may encourage speculation in the securities. Genuine investors will be afraid to enter the market, due to excessive speculation. Directors/promoters take advantage of listing for their personal gains.
Types of Listing Initial listing: The shares of the company are listed for the first time on a Stock exchange. Listing for public issue: Where a company comes out with a public issue, it is termed as listing for public issue. Listing for rights issue: When a company issue rights shares to the existing share holder, that is also to be listed. Listing of bonus shares: When a listed company capitalises its reserves by issuing bonus shares to the existing share holders, it is to be listed. Listing for merger or amalgamation: When the amalgamated company issues new shares to the share holders of amalgamated company, listing becomes necessary.
