Listing of Securities with Stock Exchange(s)

Listing denotes admission of securities of any incorporated company to dealings on a stock exchange - Securities issued by Central or State Governments, quasi-governmental, other financial institutions, municipal corporations, other statutory bodies, etc. Listing thus secures the admission of the securities to trading privileges on a stock exchange. In turn the securities after listing are readily marketable and are freely negotiable. Listing also ensures proper supervision and control of dealings at the stock exchange in relation to the listed securities and thus protects the interests of the investors.

Section 73(1) of the Companies Act makes it obligatory for companies intending to offer shares or debentures to the public for subscription by the issue of a prospectus, to make an application to one or more recognised Stock Exchanges for permission for the shares or debentures to be so offered to be dealt in on such Stock Exchange or each such Stock Exchanges. Thus, ordinarily, a public limited company incorporated under the Companies Act, has no obligation to have its shares or debentures listed on a recognised Stock Exchange. But if the company intends to offer its shares or debentures to the public for subscription by a prospectus, it must get them listed on a recognised Stock Exchange. The issuer company has to submit an application and secure an in principle approval for listing from the stock exchange before publishing the offer letter. Immediately after allotment the company also have to execute the listing agreement with the stock exchange and get the securities listed, so that trading thereon commences. SEs have their own listing requirements/rules which tend to undergo changes from time to time. There is no standard or model Listing Agreement form prescribed under law. The Stock Exchanges are free to devise their own form. Though, by and large, there is uniformity in the Listing Agreements of all recognised Stock Exchanges. The objective of the Listing Agreement is to safeguard investors’ interests and ensure transparency in the conduct of the listed companies. But when a company desires to get its security listed with multiple exchanges it had to undertake the lengthy formalities of listing process individually with each stock exchange.

The companies which are listed on stock exchanges have many obligations to discharge. These obligations are elaborated in all the relevant clauses of the Listing Agreement which the company has entered into with the Stock Exchange(s).

Obligations to be complied by the company with each of the stock exchange(s) where the securities are listed & traded in terms of Listing Agreement
[Information Extracted from website of Indian Infoline.com]

1. Payment of Annual Listing Fees: Depending upon the paid-up capital, each company is required to pay annual listing fees on or before 30th April for the each financial year to all the stock exchanges where securities of the company are listed. Each Stock Exchange has different slabs for the amount of such fees. The annual listing fees to regional stock exchange has to be paid as per the slab and for other stock exchanges the company is required to pay only 50% of the fees prescribed in the schedule of each stock exchanges.

2. Notice of Board Meetings: Information including agenda of any Board Meeting at which the company is going to consider quarterly results, yearly results, dividend (including interim dividend), rights issue, bonus issue, amalgamation, mergers, consolidation/sub-division of securities or any such matters which are price-sensitive and have an effect on the market price, must be informed at least 7 days prior to the date of the Board Meeting. Once the Board Meeting is convened, the company is required to give details of the meeting immediately after the closing hours of the trading hours of the Stock Exchanges on which the securities of the company are traded.

3. Publishing of Quarterly Results: The company is required to approve at the Board Meeting, the unaudited quarterly results within one month of the expiry of each quarter. For example, if the quarter ends on 30th June, then the board meeting should be convened on or before 30th July. With regard to the financial results for the last quarter of the financial year, if the company intimates in advance to the Stock Exchange(s) that it will publish audited results within a period of three months from the end of the last quarter of the financial year, unaudited results for the last quarter need not be published/given to the Stock Exchange(s). The chart of action plan for compliance with the requirements of publishing quarterly results, is as under :-

   1. Intimate to Stock Exchanges at least 7 days in advance about the date of Board Meeting approving results.

   2. Along with the intimation, issue a press release immediately in at least one national newspaper and one regional language newspaper intimating the date of the Board Meeting.

   3. Announce the results to stock exchanges immediately after the market hours on the date of board meeting in which financial results was placed.

   4. Publish within 48 hours of the conclusion of the Board Meeting in at least one English daily newspaper circulating in the whole of India and in one newspaper published in the language of the region, where the registered office of the company is situated.

   5. After publishing the results, send a copy of the published results to stock exchange(s).

4. Publishing Half-yearly Results: the company must submit half yearly results in the same proforma approved by its Board of Directors and subjected to a limited review by the auditors of the company within 2 months after the close of the half year. If the sum total of the first and second quarterly un-audited results in respect of any items given in the same proforma format varies by 20% or more from the respective half yearly results as determined after the limited review by the auditors, the company must send a statement as approved by the board of directors explaining reasons thereof to the stock exchanges along with the review report.

5. Book Closure Notice: The register of members and share transfer register must be closed once in a year at the time of Annual General Meeting (AGM). With regard to the closure of such books, the company is required to inform the Stock Exchanges at least 42 days in advance. It should also be noted that as per the provisions of the Section 154 of the Companies Act, 1956, the company should also give at least seven days notice in any newspaper circulating in the district in which registered office of the company is situated about the closure of register of members & share transfer register.

6. Notice of General Meetings: For all General Meetings (i.e. Annual General Meeting & Extra Ordinary General Meetings), the company is required to inform the Stock Exchanges about the agenda, date, time, venue, etc at least 21 days prior to the date of the meeting.

7. Annual General Meeting (AGM): After every AGM, the company is required to give the following :-

   1. Six copies of the Annual Report comprising of Audited Balance Sheet & Audited Profit & Loss Account, Directors’ Report, Auditors’ Report, Cash Flow Statement etc.

   2. Shareholding Pattern in the prescribed format

   3. Details of top 50 shareholders

   4. Distribution Schedule of the shareholders of the company.

   5. Proceedings of the AGM

8. Changes in Directors / Auditors / Management: Whenever there is any appointment / resignation of a Director or there is change in management or change in the Auditors of the Company, it is mandatory for the company to inform the Stock Exchange immediately of such changes.

9. Details of holdings & transfer of shares It is binding on the company as per listing agreement to transfer all the shares received for registration of transfer within a period of one month from the date of its receipt. The company should provide half-yearly certificate from a practising company secretary within a period of one month of the end of half of the financial year certifying that all certificates have been issued within one month of the date of lodgement for transfer, sub-division, consolidation, renewal, exchange or endorsement of calls/allotment monies.

In the next article we will discuss about the problems faced by companies in attending to list of securities with multiple stock exchanges and the recent establishment of Central Listing Authority as a solution thereto