BY DEEP DESAI PRO. RUTVI UMRIGER Listing of securities

Introduction  listing refers to the admission of securities of a public limited company on a recognized stock exchange for trading. Listing of securities is undertaken with the primary objective of providing Marketability, Liquidity, Transferability.  After the promulgation of “Companies Act 1988” listing of securities offered to the public, became compulsory

Objective of listing 1. Marketability. 2. Liquidity. 3. Transferability. 4. Supervision on daily trading. 5. Protect the interest of share holder and general public.

Merits of listing Liquidity. Best prices. Regular information. Periodic reports. Transferability. Income tax benefits. Wide publicity.

Demerits of listing Listed companies are subjected to various regulatory measures of the stock exchanges and SEBI. Essential information has to be submitted by the listed companies to the stock exchanges. Annual General meeting, Annual reports have to be sent to a large number of share holder. This creates large amount of unnecessary expenditure. Public offer itself is an expensive exercise. But, this is a pre – requisite for the company’s shares to be listed.

Qualification for listing Minimum issued capital. Payment of excess application money. Listing on multiple exchanges. The number of share holder. Appointment of market maker. Article of Association. Cost of Public issue. Advertisement. Minimum subscription. Applying mode. Public offer size.

Listing procedure procedure 1. Preliminary discussion 2. Article of association approval 3. Draft prospectus approval

Listing fee The stock exchange charges a fee from the company for permitting the company scrip to be traded. The listing fee varies from major stock exchange to regional stock exchanges. The fees charged by the regional stock exchanges comparatively less than less than the major stock exchanges. The fee also differs according to the equity base of the company.

Listing fees of NSe Particulars Amount Rs. 1. Initial listing fees 7, Annual listing fees [A] Companies with paid share & debenture capital of 1 crore. 4,200 [B] Above Rs. 1 Cr & up to 5 Cr 8,400 [C] Above Rs. 5 Cr to Rs. 10 Cr14,000 [D] Above 10 Cr to Rs. 20 Cr28,000 [E] Above Rs. 20 Cr to Rs. 50 Cr 42,000 [F] Above Rs. 50 Cr70,000

delisting In December 1998, the Mumbai Stock Exchange has threatened to delist shares of over 700 companies for non payment of listing fee for by December over the past year, several companies incurred loss & many of them were unable to pay the listing fee.

Types of delisting  Compulsory :- Reason for compulsory Delisting are given below. 1. Non payment of listing fee or violation of listing agreement. 2. Thin/ negligible trading or thin share holding base. 3. Non redressal of grievances. 4. Unfair trade practices at the behest of promoters or managers, and malpractice such as issuing of duplicate fake shares by management.

 Voluntary :- Reason for voluntary Delisting are given below. 1. Unable to pay the listing fee. Listing fee is prohibitive. 2. Business sick/ suspended / closed. 3. Capital base is small. 4. Mergers, Demergers, amalgamation and take overs.  Voluntary delisting is at present provided to the companies if three condition are satisfied which are given below…

Condition for voluntary delisting 1. Company must have incurred losses in the preceding three years, with net worth less than the paid up capital. 2. Securities have been infrequently traded. 3. Securities remains listed at least on the regional stock exchange.  If the condition are not fulfilled, Central Government approval would be needed. The other ground under which voluntary delisting can be allowed by a stock exchange is for thin public share holding.

Recent developments  Share of the companies listed on exchanges other than the Bombay stock exchange and seeking listing on it, will be required to have a minimum market capitalization of Rs. 20 crores as against the previous criterion of Rs 10 Crore of issued capital.  The BSE board has decided that companies should have necessarily recorded profits for the last three years, traded on at least half the total trading days with a minimum of five trades and 500 shares on any given day and have 20% of stock held with the public.  The board also decided that non friendly companies are classified into “Z” category, the exchange has identified 300 such companies.