Listing of securities | Conditions | Types | Procedures

Listing of securitiesIntroduction

For trading in the stock market, a company has to list its securities in the stock exchange. It means that the name of the company is registered in the stock exchange. The company has to fulfill certain conditions according to Companies Act. The company has to offer its shares or debentures to the public for subscription. Only then, the company will be allowed to list its security in the stock exchange. For listing shares in the stock exchange, a company must have minimum of Rs. 5 crores as its equity capital and 60% of this i.e., Rs. 3 crores is offered to the public.

Conditions for Listing

Before listing securities, a company has to fulfill the following conditions:

  1. Shares of the company must be offered to the public through a prospectus and 25% of each class of securities must be offered.
  2. The prospectus should clearly mention opening of subscription, receipt of application, etc.
  3. The capital structure of the company should be broad-based and there should-be public interest in securities.
  4. The minimum issued capital must be Rs. 3 crores of which Rs. 1.80 crores must be offered to the public.
  5. There must be at least five public shareholders for every Rs. 1 lakh of fresh issue of capital and 10 shareholders for every Rs. 1 lakh of offer for sale of existing capital. On the excess application money, the company will have to pay interest from 4% to 15%, if there is delay in refund and delay should not be more than 10 weeks from the date of closure of subscription list.
  6. A company with paid up capital of more than Rs. 5 crores should get itself listed in more than one stock exchange, it includes the compulsory listing on regional stock exchange.
  7. The auditor or secretary of the company applying for listing should declare that the share certificates have been stamped so that shares belonging to the promoter’s quota cannot be sold or hypothecated or transferred for a period of 5 years.
  8. Articles of Association of the company must have the following provisions:
    • A common form of transfer shall be used
    • Fully paid shares shall be used
    • No lien on fully paid shares
    • Calls paid in advance will not carry a right to dividend and will not be forfeited before the claim becomes time-barred.
    • Option to call off shares shall be given only after sanction by the general meeting.
  9.   Letter of allotment, Letter of regret and letter of rights shall be issued simu1taneously.
  10. Receipts for all the securities deposited, whether for registration or split and no charges will be made for the services.
  11. The company will issue consolidation and renewal certificates for split certificate, letter of allotment, letter of rights and transfer, etc. when required.
  12. The stock exchange should be notified by the company regarding the date of board meeting, change in the composition of board of directors, and any new issue of securities, in place of reissue of forfeited shares.
  13. Closing the transfer books for the purpose of declaration of dividend, rights issue or bonus issue. And for this purpose, due notice should be given to stock exchange.
  14. Annual return of the company to be filed soon after the annual general body meeting.
  15. The company will have to comply with conditions imposed by the stock exchange now and then for 1istmg of security.

Types of Listing

1. Initial listing: Here, the shares of the company are listed for the first time on a stock exchange.

2. Listing for public Issue: When a company which has listed its shares on a stock exchange comes out with a public issue.

3. Listing for Rights Issue: When the company which has already listed its the stock exchange issues securities to the existing shareholders on rights basis.

4. Listing of Bonus shares: When a listed company in a stock exchange is capitalizing its profit by issuing bonus shares to the existing shareholders.

5. Listing for merger or amalgamation: When the amalgamated company issues new shares to the shareholders of amalgamated company, such shares are listed.

Procedure for listing requirements

For listing the shares in the stock exchange, the public limited company will have to submit supporting documents. They are:

  1. Certified copies of Memorandum, Articles of Association, prospectus and agreements with Underwriters.
  2. All particulars regarding capital structure.
  3. Copies of advertisements offering securities for sale during the last 5 years.
  4. Copies of Balance sheet, audited accounts and auditors’ report for the last 5 years.
  5. Specimen copies of shares and debentures, certificate letter of allotment, and letter of regret.
  6. A brief history of the company since incorporation with any changes in capital structure, borrowings, etc.
  7. Details of shares and debentures issued for consideration other than cash.
  8. Statement showing distribution of shares and particulars of commission, brokerage, discounts or special terms towards the issue of shares.
  9. Any agreement with financial institutions.
  10. Particulars of shares forfeited.
  11. Details of shares or debentures for which permission to deal with is applied for.
  12. Certified copy of consent from SEBI.

Procedure at the Stock Exchange

After the application is made the Listing Committee of the stock exchange will scrutinize the application form of the company. Here, the stock exchange will ensure the following—

  1. the financial position of the company is sound
  2. solvency and liquidity positions are good
  3. the issue is large and broad based to generate public interest. If the application for listing is accepted, the listed company will be called to execute listing agreement with the stock exchange. The company must follow certain obligations which are:
    • the company will treat all the applications with equal fairness.
    • in case of over subscription, the allotment will be decided in consultation with stock exchanges; and
    • the company will notify to the stock exchange any change in its management, business, capital structure or bonus or rights issue of shares.
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