What is the procedure of listing securities?
Ans. The stock exchange has to allow the companies to trade their securities. For this pur pose a company has to fulfill certain formalities to include their securities in the off cial trade list of securities.
Listing of securities means the inclusion of securities in the official list of stock exchange for the purpose of trading. The listed securities are also known as quoted securities.
The stock exchange neither assure the financial soundness of company nor recommends the selection of securities, but it makes a clarification to the investors about the legality and insolvency of the company.
If any company gets denial to be listed in any stock exchange, it can file an appeal to the Government against such denial. The Securities Contracts (Regulation) Act, 1956 empowers the government of direct the stock exchange for enlisting the company after examining both parties explanation about their position.
Each stock exchange has a listing department to grant the approval of listing securities accordance with the Rules of Securities Contracts (Regulation) Act, 1956 and 1957, Companies Act, 2013 and guidelines of SEBI.
Read more :- Who is a stock broker? Explain the role played by him in the financial market.
Procedure for Listing of the Securities:
A company with minimum issued capital of Rs. 3 crores of which at least Rs. 1.8 crore (60%) is offered to the public can apply for listing in the prescribed proforma along with the following documents:
1) Copies of Memorandum of Association and Articles of Association, Prospectus, Directors' Reports, Balance Sheets and agreements with underwriters and brokers etc.
2) Specimen copies of shares and debentures certificates, letters of allotment, acceptance renunciation etc.
3) Particulars regarding capital structure.
4) A statement showing the distribution of shares.
5) Particulars of dividends and bonus declared and or paid during the last 10 years.
6)Particulars of shares or debentures for which permission to deal is applied for
7) Brief report on company's activities since its incorporation
8) Listing agreement with required initial and annual listing fee.
A new company may not be able to submit some of the above documents and it will not be an objection for enlisting. After the submission of application along with the above documents by the company, the stock-exchange scrutinizes the application by taking certain aspects into consideration with regard to the policy of company in dealing with the shares. After scrutiny, if the stock exchange is satisfied with the particulars filed, it may inform the company to execute a listing agreement. The agreement contains the obligations and restrictions which listing entail.
The central listing authority has been set up in the year 2003 by SEBI as a self- regulatory organization. It is established for ensuring uniform and standard practices for listing the securities in all Indian stock exchanges. It will have a check on the operators in small exchanges that have lenient listing norms.
The Companies can delist their securities in the stock exchange voluntarily or compulsorily. If they want to relist them again it can be done after two years by duly fulfilling the formalities.
Along with listed securities, permitted securities are also allowed to be dealt with in the stock exchanges. Permitted securities are those securities which are not listed in that particular stock exchange but are actively traded in other stock exchanges. This is done with an intention to help the participants of that particular stock exchange.
The aims of listing the securities are:)
1) to have control over the dealings of securities and to have proper supervision.
2) to decentralise the economic power..
3) to safeguard the interests of promoters.
4) to protect the interests of investors and shareholders.