Shares Listing Procedure in India

company has to list its securities on the stock exchange for trading in the stock market. Listing of securities means a company is registered on the stock exchange. The company has to fulfil the conditions mentioned in Companies Act. To list its securities in stock exchange, company has to offer its securities to the public for subscription. A company must have minimum equity capital of Rs. 5 crores and 60% of this amount are offered to the public, for Shares Listing on the stock exchange.

Conditions for Shares Listing

According to Regulation 4(2) of SEBI[1] (Issue of Capital and Disclosure Requirements) Regulations 2009, no issuer shall make a public issue or rights issue of securities unless they make an application to one or more recognized stock exchanges and have chosen one of them as a designated stock exchange.

In the case of Initial Public Offer, it is required for the issuer to make an application for Shares Listing in at least one recognized stock exchange having nationwide trading terminals.

The company has to follow specified conditions before Shares listing in stock exchange:

• Shares of a company shall be offered to the public through the prospectus, and 25% of securities must be offered.
• Date of opening of subscription, receipt of the application and other details should be mentioned in the prospectus.
• The capital structure of the company should be wide and the securities of the company should be in public interest.
• The requirement is Rs. 3 Crores out of which 1.8 Crore must be offered to the public.
• There is a requirement of at least 5 public shareholders in respect of every Rs. 1 Lakh of fresh issue of capital and 10 shareholders for every Rs.1 lakh of the offer of existing capital.
• In the case of excess application money, the company has to pay interest within the range of 4% to 15%, in case there is a delay in the refund then such delay should not be more than 10 weeks from the date of closure of subscription list.
• The company with paid-up share capital of more than Rs. 5 crores should get itself registered in the recognized stock exchange and compulsorily on the regional stock exchange.
• The auditor or secretary of the company has to declare that share certificate has been stamped for listing so that shares belonging to promoter’s quota cannot be sold or transferred for 5 years.

An article of Association must contain the following provisions:

1. A common form for transfer shall be used;
2. Fully paid shares shall be utilized;
3. No lien on fully paid shares;
4. Calls paid in advance will not carry the right to dividend and cannot be forfeited before claims become time-barred.
5. Only after the sanction by the general meeting, option to call off shares shall be given;

• Letter of allotment, Letter of regret and letter of a right shall be issued.
• Receipts for all securities deposited either by way of registration or split.
• Consolidation and renewal certificates will be issued for a certificate of the division, letter of allotment, transfer, and letter of rights, etc.
• The company has to notify stock exchange regarding the board meeting, change in the composition of a board of directors and the case of the new issue of securities in place of a reissue of forfeited shares.
• Due notice should be given to stock exchange, for closing transfer books for a declaration of dividend, rights issue or bonus issue.
• After the annual general meeting, the annual return is required to be filed.
• The company is required to comply with the conditions imposed by the stock exchange for the listing of security.

Different Types of Listing of Securities

• Initial Listing

In case shares of the company are listed for the first time in the stock exchange.

• Public issue

The company who has listed its shares on a stock market comes out with a public issue.

• Right Issue

The company who has listed its shares in a stock exchange issues shares to its existing shareholders.

• Bonus Shares

When a listed company issue bonus shares to its existing shareholders for capitalizing its profits.

• Listing for merger or amalgamation

The amalgamated company issues new shares to the shareholders of the merged company, and these new shares are listed.

Documents for Shares Listing

Public Company has to submit the following documents to Shares Listing in stock exchange:

• Certified copy of Memorandum & Article of Association;
• Prospectus & agreement with underwriters;
• Details of Capital Structure;
• Copies of an advertisement offering securities during the last 5 years;
• Copies of financial statement & auditor’s report for the last 5 years;
• Copy of shares & debentures, letter of allotment and letter of regret;
• Details of the company since incorporation including changes in the capital structure, borrowings, etc.;
• Details of shares or debentures issued for consideration other than cash;
• A statement defining the distribution of shares and other details related to the commission, brokerage, discounts, or terms related to issue of shares;
• Agreement with a financial institution, if any;
• Details of shares forfeited;
• Details of securities about which permission to deal with are applied for;
• A copy of consent from SEBI.

Procedure for Shares Listing

The application is made to the listing committee of the stock exchange by the company, and then the listing committee will scrutinize the application form of the company.

Stock Exchange will ensure the following:

• Whether the financial position of the company is sound or not;
• Solvency & liquidity positions of the company;

In case the application for listing is accepted then the listing company will have to execute a listing agreement with the stock exchange.

Obligations required to be followed by the company:

• It is required to treat all application with equal fairness.
• In the case of oversubscription, the process of allotment will be decided in consultation with stock exchanges.