Listing of Securities

Concept of Listing of Securities

 It means the admission of shares of a public limited
company on the stock exchange for the purpose of
trading.
 A company intending to have its shares listed on the
stock exchange has to write an application to one or
more recognized stock exchanges.
 A company becomes qualified to list its shares after
getting the prior permission from the stock exchange.
 Some of the advantages of listing of securities are:
 Liquidity  Best prices  Wide publicity
 Some disadvantages of listing of securities are:
 Subjected to various regulatory measures
 Expensive exercise
 Criteria for Listing
A company that wants its securities to be listed in the stock exchange has to fulfill
certain minimum requirements, such as:
 Minimum issued capital: A company should have minimum issued capital

of Rs.3 crores and the minimum public offer must be of Rs.75 lakhs.
 Listing on multiple exchanges: It is essential for a company to get listed in

the stock exchange if its paid up capital is above Rs.5 crores.

 Number of shareholders: A company must have a minimum ten

shareholders.
 Articles of Association: The Articles of Association must be prepared in line

with the sound corporate practice of a company.

 Advertisement: A company during the subscription period must not advertise

by thanking the public for their overwhelming response.

 Applying mode: A company must issue a prospectus, which provides

information on how the investor should apply for the shares.

 Public offer size: A company, in the first page of the prospectus must state

the size of the public offer and the value of shares.

 Listing Procedure
To get the listing permission from the stock exchange, a company has to
undertake the following steps:
 Preliminary discussion: A company must have a detailed discussion with

the authorities of the stock exchange in order to acquire complete knowledge

about the various formalities to be completed for listing of securities.
 Articles of Association approval: A company must fulfill the following
requirements in order to get the Articles of Association approved by the
stock exchange authorities:
 It must use a common form of transfer.
 In case of distributing dividends, it must comply with Section 205-A
of the Companies Act.
 The free dealing of shares must not be restricted by any provision.
 Draft prospectus approval: It is very essential for a company to get its
draft prospectus approved from the stock exchange authorities. A prospectus
must contain all the information required by the stock exchange.
 Listing Application
 A company that wants to offer its shares through the
prospectus must file an application to the stock exchange.
 A company has to file following certificates along with the
prospectus:
 Three certified copies of the memorandum and articles of
association, and debenture trust deed.
 A copy of every report, balance sheet, valuation, court order, etc.
as specified in the prospectus.
 Certified copies of underwriting, brokerage and sales managers’
agreement.
 Copies of agreements with the financial institutions.
 Listing Fee
 It is a fee charged by the stock exchange from the
company for permitting the company’s securities to
be traded in the exchange.

 It varies from major stock exchanges to regional

stock exchanges.

 It also varies due to the equity base of the

company.
 Listing of Right Shares
A company has to fulfill certain formalities in case of listing
right shares in the stock exchange, such as:
 A company must inform the stock exchange about the date of
meeting with the Board of Directors for considering the proposal
of listing right shares.
 A company must obtain the consent of the shareholders by
passing on a special resolution.
 A company must file a letter of offer that provides the financial
information about the current market price of the share.
 A company must file a letter of offer within six weeks.
 A company must file a specimen copy of the offer letter to the
stock exchange.
 Delisting
 It is the removal of a company’s shares from the listing in
the stock exchange.
 Delisting can be of two types:
 Compulsory: The causes for compulsory delisting are as
follows:
 Non-payment of the listing fee
 Non-redressal of grievances
 Unfair trade practices carried on by the managers

 Voluntary: The causes for voluntary delisting are as follows:

 Business suspended
 Mergers and takeovers
 Small capital base