LISTING OF SECURITIES IN STOCK EXCHANGE BEST NOTES

LISTING OF SECURITIES IN STOCK EXCHANGE : Meaning of listing and the legal requirements etc.

QUESTION: What is meant by listing of securities? Which documents are to be filled with stock exchanges for listing of securities?

ANSWER: LISTING OF SECURITIES IN STOCK EXCHANGE: Listing means admission of securities of an issuer to trading privileges or dealings on a stock exchange through a formal agreement. 

In other words, listing of securities means permission to quote shares and debentures officially on trading floor of the stock exchange.

The prime objective of listing or admission to dealings on the exchange is to provide liquidity and marketability to securities and also to provide a mechanism for effective control and supervision of trading.

DOCUMENTS REQUIRED FOR LISTING OF SECURITIES IN STOCK EXCHANGE : The following documents must be filed with the stock exchanges to get the securities listed:

• Memorandum of association and Articles of association
• Copies of all prospectus and statement in lieu of prospectus.
• Copies of balance sheets, audited accounts, agreements with promoters, underwriters, brokers etc.
• Letters of consent from controller of capital issuer, now replaced with SEBI.
• Details of share and debentures issued and shares forfeited.
• Details of issue of bonuses and dividends declared.
• History of the company in brief.
• Agreement with managing director, etc.
• An undertaking regarding compliance with the provisions of Companies Act, 2013 and Securities Regulation Act 1956 as well as rules made therein.
• A list of the highest ten holders of each class or kind of securities of the company.

PROCEDURE AND LEGAL REQUIREMENTS OF LISTING OF SECURITIES IN STOCK EXCHANGE: A company desires of listing its securities on the exchange shall be required to file an application with the stock exchange in the prescribed form.

1. APPLICATIONS IN RESPECT OF NEW ISSUES OR OFFERS FOR SALE OR BOOK-BUILDING: Tenders or applications for subscription or purchase or book-building in respect of any issue or offer for sale of any security shall not be submitted unless the issuer or officer offers to all a fair and equal opportunity for subscription or purchase and on the same terms as to brokerage to all the trading members.

The issuer or the offeror, prior to issuing further securities or offering securities for sale, shall obtain an approval from these securities on the exchange.

2. SUBMIT APPLICATION FOR ADMISSION TO DEALINGS: The issuer shall submit an application for admission of its securities to dealings on the exchange in the prescribed form after, ensuring compliance with the applicable provisions in the SCRA, SCRR, Companies Act and the rules, regulations and norms as may be issued by SEBI/Exchange in this regard from time to time.

3. UNITS AND EXCHANGE TRADED FUNDS: Units of mutual funds may be admitted to dealings on the exchange subject to such conditions and requirements, as may be prescribed by the governing board or relevant authority from time to time.

4. OPTIONS OR FUTURES IN SECURITIES: Options or securities and in securities index or indices shall be admitted to dealings on the exchange by the governing board or relevant authority in authorized with the provisions of SCRA and norms issued by the SEBI from time to time as may be specified in the relevant bye-laws and regulations framed in this regard.

5. NOTICE OF APPLICATION FOR ADMISSION TO DEALINGS: Notice of any application for admission to dealings on the exchange shall be posted on the notice board or displayed on the ATS or website of trading members and others, at least one week prior to its consideration by the exchange.

6. UNDERWRITING, PLACING AND PRELIMINARY ARRANGEMENTS: A trading member shall not enter into an underwriting contract nor shall he contract either as a principal or agent or underwriter to subscribe, purchase or to procure securities.

7. LISTING CONDITIONS AND REQUIREMENTS: Listing requirements are the set of conditions imposed by a given stock exchange upon companies that want to be listed on the exchange.

• Compliance with bye laws: The governing board or managing director or relevant authority may not grant admission to dealings on the exchange to a security of an issuer unless the issuer complies with the listing conditions, requirements and norms, under the SCRA, SCRR and the Companies Act 2013.
• Completion of allotment process: It must be ensured that no listing or trading permission is granted unless the issuer completes dispatch of physical share certificates to or demat shares to the accounts of all the security-holders, maintained with the depositories.
• Information to the depository: Where the allotment has been decided by the exchange then stock exchange shall intimate the depositories about approval granted for admission to dealings on the exchange for any security.
• Listing agreement: The company shall execute a listing agreement, in the prescribed form with the exchange, prior to approval of the listing application of the company.
• Same day permission for trading: In case of new issue or further issue by any issuer, the governing board or relevant authority may grant permission for trading in any security at the exchange on the same day on all other stock exchanges where such security admitted to dealings is granted permission for trading.

8. SECURITIES ISSUED ON PREFERENTIAL ALLOTMENT BASIS OR UNDER ESOP: Securities issued under preferential allotment or ESOP may be granted admission to dealings on the exchange on complying with the listing conditions, requirements and norms under SCRA, SCRR and the Companies Act 2013.

9. NO ADMISSION TO ISSUERS REGISTERED OUTSIDE INDIA: Admission to dealings on the exchange shall not be granted unless

• There is adequate public interest in such securities in India.
• The body corporate, fund or other entity agrees to abide by the applicable statutory provisions.

10. WAIVING OF LISTING CONDITIONS OR REQUIREMENTS: In case of a body corporate formed or registered outside India, the governing board for reasons to be recorded in writing, waive or dispense with the strict enforcement of any or all of the listing conditions and requirements prescribed in these bye laws and regulations.