Listing
refers to the admission of security of a public limited company on a
recognized stock exchange for trading. The prime objective of
admission to dealings on the exchange is to provide liquidity and
marketability to securities, as also to provide a mechanism for
effective control and supervision of trading. Listing of securities
offered to public becomes compulsory.
The
objectives of listing are mainly to:
- provide liquidity to securities.
- mobilize savings for economic development.
- protect interest of investors by ensuring full disclosures.
Procedure
to list securities:
The
process of security listing on the Exchange consists of several steps
and process is specific to stock exchange. Preliminary discussion
with stock exchange followed by articles of association approval.
Draft prospectus approval is the essential pre-requisite for the
security to be listed.
- 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.
- Every issuer, depending on the category and type of security has to submit supporting documents required for specific stock exchange along with application.
- All listing are subject to compliance with Bye laws, Rules and other requirements framed by the Exchange from time to time in addition to the SEBI and other statutory requirements.
- Companies making public/rights issues are required to deposit 1 % of the issue amount with the designated stock exchange before the issue price.
- On getting an in-principle consent of the exchange the issuer has to enter into a listing agreement specific to Stock Exchange.
- On getting an in-principle consent of the exchange the issuer has to enter into a listing agreement.
- The companies are also required to pay to the exchange some listing fee as prescribed by the exchange every financial year.
Merits
of Listing:
- Liquidity.
- Best Price
- Regular information
- Periodic reports
- Transferability
- Periodic reports
- Transferability
- Income tax benefit
- Wide publicity
Demerits
of listing:
- Listed companies are subjected to various regulatory measures of the stock exchange and SEBI
- Essential information has to be submitted by the list companies to the stock exchanges.
- AGM and annual reports have to be sent to large no of shareholders.
- Public offer that is itself an expensive exercise. But is prerequisite of the companies shares to be issued.
