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Listing means the admission of securities of a company to the trading privileges of a stock exchange.

The principal objectives of listing are to: (i) provide ready marketability and impart liquidity and free transferability to securities, (ii) ensure proper supervision and control of dealings therein (iii) protect the interests of shareholders and the general investing public. Every company issuing shares/debentures to the public should obtain permission from a stock exchange for listing, within the prescribed time. The listing regulations in India include the delisting of securities and listing agreement.

Delisting of securities may be (a) voluntary or (b) compulsory by stock exchange(s). Only Public Companies are allowed to list their securities in the Stock Exchange. Private Limited Companies shall first convert into Public Limited Company and amend the Articles of Association as application to Public Limited Company. Types of Listing i. ii. iii. Initial Listing for the first time by a company Listing for Public Issue When a company whose shares are listed on a stock exchange comes out with a public issue, it has to list such issue with the stock exchange. Listing for Right Issue When companies whose securities are listed on the stock exchange issue securities to existing shareholder on right basis, it has to list such rights issues on the concerned stock exchange. Listing of Bonus shares Shares issued as a result of capitalization of profit through bonus issue shall list such issues also on the concerned stock exchange.



Listing for merger or amalgamation When new shares are issued by an amalgamated company to the shareholders of the amalgamating company, such shares are also required to be listed on the concerned stock exchange.

Listing of Securities The listed shares are generally divided into two categories namely: (i) Group A shares (Specified shares or cleared securities). (ii) Group B shares (Non-specified shares or non-cleared securities).

Group A shares represent large and well established companies having broad investor base. These shares are actively traded. Under Group C, only odd lots and permitted securities are included. A number of shares that are less than the market lot are known as odd lots. Market lot refers to the minimum number of shares of a particular security that must be transacted on a stock exchange. Odd lots have settlement once in a fortnight or once on Saturdays. Permitted securities are those that are not listed on a stock exchange but are listed on other stock exchanges in India

Advantages of Listing (i) Facilitates Buying and Selling Securities (ii) Ensures Liquidity (iii) Offers wide Publicity (iv) Assures Finance (v) Enables Borrowing

(vi) Protects Investors Drawbacks (i) Leads to Speculation Leads to speculation. (ii) Degrades Companys Reputation (iii) Discloses Vital Informations to Competitors

Listing PROCEDURE As stated earlier, listing enables a company to include its securities in the official list of one or more recognised stock exchanges for the purpose of trading. A company which requires its securities to be listed must comply with the following formalities: The company concerned must applyin the prescribed form along with the following documents and details: (i) Certified copies of Memorandum and Articles of Association, Prospectus or Statement in lieu of Prospectus, Underwriting agreements, agreements with vendors and promoters etc.

DELISTING of securities (a) voluntary or (b) compulsory by stock exchange(s).

Voluntary delisting means delisting of securities by a promoter/an acquirer/any other person, other than the stock exchange. A company may delist if its securities have been listed for at least 3 years. An exit opportunity should be given to the investors on the basis of an exit price determined according to the book building process. The final offer price would be determined as the price at which the maximum number of shares have been offered. The promoter/acquirer would have to accept offers upto and including the final price. The offer price should have a floor price equal to the average of 26 weeks traded price quoted on the stock exchange where the shares of the company was frequently traded 26 weeks preceding the date of public announcement and without any ceiling of maximum price. The payment of consideration for delisting should be made by the promoter/acquirer in cash.

A stock exchange may compulsorily delist companies which have been suspended for 6 months for non-compliance with the listing agreement. It may also delist companies as per the SEBI norms/ procedures.

These norms would include the percentage of equity capital (floating stock) in the hands of public investors; minimum trading level of shares on the stock exchange; financial/business aspects; track record of compliance of the listing agreement requirements for the past 3 years; promoters/directors track record specially with regard to insider trading, manipulation of share prices and unfair market practices; non-availability of whereabouts of the company/promoters/directors; sick/defunct companies. Delisting decision should be taken by a joint panel, comprising of representatives of the stock exchange, Government and investors.

The promoter of the compulsorily delisted companies would be liable to compensate the security- holders and pay the fair value of their securities, determined by an arbitrator, having regard to the factors listed in SEBI Substantial Acquisition of Shares and Takeover Regulations. However, the security holders would have the option to remain security holders with the company.

Reinstatement of delisted securities would be permitted by the stock exchange with a cooling of 2 years, according to the respective norms/criteria for listing and after the scrutiny of the application by the CENTRAL LISTING AUTHORITY. A listing agreement is a code of discipline which stock exchanges impose on a company as a condition precedent to listing. The listed company has certain obligations and has to comply with the various clauses of the agreement. The listing agreement for equity shares has 51 clauses.

Clause 49 deals with corporate governance. The main elements of this clause relate to: Board of Directors, Audit Committee, Subsidiary Companies, CEO/CFO Certification, Report on Corporate Governance and Compliance. The Board of Directors of the company should consist of at least 50 per cent non-executive directors. At least one-third or one-half of the Board should comprise of independent directors in case of non-executive and executive chairman respectively. An independent director means a non-executive director who (a) apart from receiving directors remuneration, does not have any material pecuniary relationship/transaction with the company/its promoters/directors/senior management (i.e. personnel who are members of the core management one level below executive directors)/holding company/ subsidiary company and associates, (b) is not related to promoters/persons occupying management position at the Board/one level below the, (c) has not been an executive in the preceding 3 financial years, (d) is/was not a partner/executive during the preceding 3 years of the statutory/internal audit firm associated with the company/the legal/consulting firm having a material association with the company, (e) is not a material supplier/service provider/customer/lessee of the company, (f) is not a substantial shareholder owning 2 per cent or more of the voting shares. Nominee directors would be deemed to be independent directors. Fee/compensation including stock options, paid to all non-executive directors should be approved by the shareholders. The Board of Directors should meet at least 4 times a year.

A director can be a member of 10 committees or act as chairman of 5 committees across all companies in which he is a director. The Board should periodically review compliance reports of all laws applicable to the company. It should also lay down a code of conduct for all Board members and senior management, who should affirm compliance with the code on an annual basis. A qualified and independent Audit Committee should be set up with at least 3 member-directors, two-thirds being independent. All members should be financially literate (i.e., they should possess the ability to read and understand the basic financial statements) and at least one member should have accounting or related financial management expertise. The chairman of the audit committee should be an independent director and the company secretary would be its ex-officio secretary. The committee should meet at least 4 times in a year. The powers of the Audit Committee should includeinvestigating any activity within its terms of reference, seeking information from any employee, obtaining outside legal/other professional advice and securing attendance of outsiders with relevant expertise. The role of the Audit Committee would include: overview of the financial reporting process to ensure correctness, sufficiency and credibility of the financial statements; to recommend the appointment, reappointment/replacement of auditors and their fee; review with the management (a) the annual and quarterly financial statements for submission to the Board for approval, (b) performance of auditors/adequacy of internal control systems; review the adequacy of internal audit function; review the findings of any internal investigation into suspected fraud/irregularity/failure of internal control systems of a material nature; look into reasons for substantial default in

payment to depositors creditors/debenture holders and so on; review the functioning of the Whistle Blower mechanism and so on. The Audit Committee must review information relating to (i) management discussion/analysis of financial condition/result of operations, (ii) statement of significant related party transactions, and (iii) letter of internal control weaknesses by the auditors. A material non-listed Indian subsidiary company should have on its Board, at least one independent director of the holding company. Its minutes of Board meetings should be placed at the Board meeting of the listed holding company. Its financial statements should also be reviewed by the audit committee of the listed company. The disclosure requirements of the corporate governance clause pertain to: basis of related party transactions, disclosure of accounting treatment, risk management, proceeds from public/rights/ preferential issues, remuneration of directors, management discussion/analysis report, and information to shareholders on the appointment/reappointment of a director. The CEO and the CFO should certify to the Board of Directors that (I) (II) (III) the financial statements present a true and fair view, no transaction is fraudulent, illegal/violative of the code of conduct, they accept full responsibility for establishing/maintaining internal controls and (iv) they have indicated to the auditors/audit committee significant changes in internal control/accounting policies and instances of significant frauds which they became aware of.

The annual reports should contain a separate section on Corporate Governance. Non-compliance of any mandatory requirement with reasons and the extent of adoption of non-mandatory requirements should be highlighted. The companies should submit a quarterly report signed by the compliance officer/CFO, to the stock exchanges, within 15 days from the close of the quarter in the prescribed format. The company should annex with the directors report to the shareholders, a certificate from the auditors/company secretaries regarding compliance with the conditions of corporate governance. This should also be sent to the stock exchange, along with the companys annual report. The non-mandatory requirements may be implemented at the discretion of

the company.