Listing of Securities

Meaning of Listing
Any kind of securities can neither be purchased nor sold at any of the stock-exchange
without the prior permission of Stock exchange. Every company needs to register(listed)
their stocks at any stock exchange this process called Listing. when a security is included in
the list with term, conditions, and objectives for sales then such security called as Listed
Security.

Security Contract (Regulation) Act and Listing

Central Government is empowered to force any Public Company to get listed under section
21 of Security Contract (Regulation) Act. 1956. The main objective of this kind of provision is
to safeguard the interests of the investors. Before implementation of this act listing rules of
different stock exchanges were at variance with each other. But according to Rule 91 the
Security Contract (Regulation) Act 1957 a Public Limited must follow the under-mentioned
procedure for getting listed and in this way a uniformity is brought in the listing rules and
regulations of various stock-exchanges.
This procedure can be divided in three parts:
(I) Application Form and details of documents and other relevant details to be
forwarded with it.
(II) Satisfaction of the company applying for listing as well as of the concerned Stock
Exchange.
(III) Commitment by the applicant Company to follow the rules and regulations of the
stock-exchange.

Grouping of Share on Stock Exchange

Group-A Shares: - This type of means large and well-established companies having a broad
investors base. These shares are actively traded. Having a lot of speculative multiples. And
these securities also called specified or cleared securities.
Group-B Shares: - This kind of securities just the opposite of Group A shares. Those facilities
which are available in the Group-A shares are not available in B. they are called as non-
specified or non-cleared shares.
Group-C Shares: - Apart from the above, these is another group called Group C shares.
Under Group C, only odds lots and permitted securities are included. A number of shares
that are less than the market lot are known as od lots.
Advantages of Listing

I. Ready marketability: Listing provides greater marketability and liquidity to those

who have invested money in a listed company.
II. Disclosure of information: If the securities of a company are listed, it ensures proper
supervision and control on the activities of the company through disclosures and
submission of many returns about their working and financial results.
III. Price quotations: If the securities of a company are traded on a stock exchange their
price quotations are available from stock exchange and newspapers, this information
proves useful for income-tax, wealth tax and gift-tax purposes.
IV. Fair dealings: Dealing through brokers of stock exchange ensures fairness in dealings
and trade practices.
V. Capital formation: Enhanced investors, confidence helps in flow of savings in the
capital market.
Listing brings many advantages to the company also, which are:
VI. Better status: A company whose shares are listed on a stock exchange enjoys better
status, goodwill, and creditworthiness in the market.
VII. Wider market: The market for the securities of a listed company widens specially if
the securities are listed on many stock exchanges.
VIII. Facility in borrowing: A listed company can find borrowing a bit more easy as
compared to an unlisted company.
IX. Compulsion to follow corporate practices: A listed company is under compulsion to
follow certain standard corporate practices and procedures. It has to declare yearly
financial results, inform about dividends, closure of books for transfer etc. to stock
exchange authorities.

Disadvantage of Listing
I. Encourage speculation: After listing there is lot of speculations in shares.
Speculators may manipulate the prices of share.
II. Bad Publicity: Companies, sometimes, have to pass through lean periods when their
performance is not up to the mark. This situation creates bad publicity.
III. Discloses vital information to competitors: For getting the securities listed, a
company has to disclose vital information such as, dividends and bonuses declared, a
brief history of the company, sales, remuneration to managerial personnel and so
on.
Listing Procedure
As stated earlier, listing enables a company to include its securities in the official list of one
or more recognized 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 apply in the prescribed form along with the following
documents and details:
a. Certified copies of Memorandum and Articles of Association, Prospectus or
Statement in lieu of Prospectus, Underwriting agreements, agreements with
vendors and promoters, etc.
b. Specimen copies of shares and debenture certificates, letter of call,
allotment, acceptance, and renunciation.
c. Copies of balance sheets and audited accounts for the last 5 years.
d. Copies of offers for sale and circulars or advertisements offering any
securities for subscription or sale during the last 5 years.
e. Certified copies of agreements with managerial personnel.
f. Particulars of dividends and bonuses paid during the last 10 years
g. A statement showing dividends or interest in arrears if any.
h. A brief history of the company since its incorporation, giving details of its
activities.
i. Particulars regarding its capital structure.
j. Particulars of shares and debentures for which permission to deal is applied
for and their issue.
k. A statement showing the distribution of shares along with a list of highest 10
holders of each class or kind of securities of the company stating the number
of securities held by them.
l. Particulars of shares forfeited.
m. Certified copies of agreements if any with the Industrial Finance Corporation,
ICICI, etc.
n. Listing agreement with the necessary initial and annual listing fee.

Criteria for listing

A company which desires its securities to be listed on a recognized stock exchange must
satisfy the following condition:
I. At least 60 per cent of each class of securities issued must be offered to the public
for subscription and the minimum issued capital should be 3 crores.
II. The minimum public offer for subscription must be at least 25 per cent of each issue
and it must be offered through advertisement in newspapers at least for a period of
2 days.
III. The company should be of a fair size having broad based capital structure and public
interest in its securities.
 IV. There must be at least 10 public shareholders for every 1 lakh share of fresh issue of
capital and it is 20 in the case of subsequent issue of shares. This criterion is different
for investment companies.
V. A company having more than 5 crore paid-up capital must list its securities on more
than one stock exchange. Listing on the regional stock exchange is compulsory.
VI. The company must pay interest on the excess application money received at the
rates ranging between 4 per cent and 15 per cent depending on the delay beyond 10
weeks from the date of closure of the subscription list.
VII. The Articles of Association of the company must provide for the following:
a) A common form of transfer shall be used.
b) Fully paid-up shares will be completely free from lien.
c) Partly paid-up shares will be subject to lien only to the extent
d) of call money due at a fixed time.
e) Calls in advance carry only interest and not dividend rights.
f) Unclaimed dividends shall not be forfeited before the claim becomes time barred.

Listing Obligations
A company whose securities have been listed on a stock exchange has to perform certain
obligations also. Some of the important obligations have been given here under:
The company has to compulsorily notify the stock exchange:
I. The date of the board meeting at which the declaration or recommendation of
dividend or the issue of right or bonus share will be considered.
II. Any change in the company's directorator managerial personnel by death,
resignation, removal or otherwise
III. Any issue of new shares, rights shares or otherwise as well as the issue of any
privileges or bonuses to members, even before they are intimated to shareholders.
IV. Any change in the company's capital structure.
V. Any material changes in the general character or nature of the company's business.
VI. Any reissue of forfeited securities or the issue of any other securities held in reserve
for future issue.
VII. Any action which will result in the redemption, cancellation or retirement of any
securities listed on the stock exchange.
VIII. Any intention to make a drawing of listed securities.
IX. Any other information necessary to enable the shareholders to appraise the
company's position so as to avoid the establishment of a false market in the shares
of the company.
X. In addition to the above, the company has to forward to the stock exchange:
a) Copies of all notices and circulars sent the shareholders including the proceedings of
ordinary and extraordinary general meetings.
b) Certified copies of all resolutions passed by the company as soon as such resolutions
become effective.
c) Copies of statutory and annual reports and annual audited accounts as soon as they
are issued as well as the director's report.
d) Annual return of at least 10 principal holders of each class of security of the
company