Listing means admission of securities to dealings on a recognized stock exchange. The securities may be of any public limited company, Central or State Government, quasi governmental and other financial institutions/corporations, municipalities, etc. The objectives of listing are mainly to:
• provide liquidity to securities;
• mobilize savings for economic development;
• protect interest of investors by ensuring full disclosures. A company, desirous of listing its securities on the Exchange, shall be required to file an application, in the prescribed form, with the Exchange before issue of Prospectus by the company, where the securities are issued by way of a prospectus or before issue of 'Offer for Sale', where the securities are issued by way of an offer for sale.
• Companies Act, 1956.
As per S. 73 of the companies Act, 1956, a company seeking listing of its securities on a stock exchange is required to submit a Letter of application to all the stock exchanges where it proposes to have its securities listed before filing the prospectus with the registrar of companies. • SEBI Guidelines.
o A company is required to complete the allotment of securities offered to the public within 30 days of the date of closure of the subscription list and approach the designated stock exchange for approval of the basis of allotment. o Issuer company to complete the formalities for trading at all the stock exchanges where the securities are to be listed within 7 working days of finalization of the basis of allotment. o Companies making public/rights issues are required to deposit 1 % of the issue amount with the designated stock exchange before the issue price.
• Stock Exchange guidelines.
In addition to all these rules, regulation and compliance every stock exchange have a set of guidelines of its own for the companies to be listed on them. For example they may provide for the minimum issue size and market capitalization of the company A company has to enter into a listing agreement before being given permission to be listed on the exchange. Under this agreement the company undertakes amongst other things, to provide facilities for prompt transfer, registration, sub-division and consolidation of securities: to give proper notice of closure of transfer books and record dates, to forward 6 copies of unabridged Annual reports, balance sheets and profit & loss accounts, to file shareholding patters and financial results on quarterly basis and to intimate promptly to the exchange the happenings which are likely to materially affect the financial performance of the company and its stock price and to comply with the conditions of Corporate governance. The companies are also required to pay to the exchange some listing fee as prescribed by the exchange every financial year. A company not complying with these requirements are may face some disciplinary action, including suspension/ delisting of their securities. In case the exchange does not give permission to the company for listing of securities, the company cannot proceed with the allotment of shares.
Delisting of securities means removal of the securities of a listed company from the stock exchange. It may happen either when the company does not comply with the guidelines of the stock exchange, or that the company has not witnessed trading for years, or that it voluntary wants to get delisted or in case of merger or acquisition of a company with/by some other company. So, broadly it can be classified under two head: 1. Compulsory delisting.
2. Voluntary delisting
Compulsory delisting refers to permanent removal of securities of a listed company from a stock exchange as a penalizing measure at the behest of the stock exchange for not making submissions/comply with various requirements set out in the Listing agreement within the time frames prescribed. In voluntary delisting, a listed company decides on its own to...