Listing of securities at the stock exchange:
Securities can be traded at a stock exchange only if it is listed at that stock exchange or any other stock exchange. The listing is a procedure under which the issuing company has to enter into an agreement, called the Listing Agreement (which has been prescribed by the SEBI) with a stock exchange and has to thereby abide by various clauses of the ‘Listing Agreement’ regarding disclosure of information, payment of listing fees, redressal of investors grievances, etc. There are 51 clauses and several annexure’s in the Listing Agreement (as prescribed by the SEBI). Once, listed at any stock exchange, the security can then be traded at other stock exchanges also. The SEBI guidelines for the issue of securities require that the security must be listed on at least one regional stock exchange.
The principal objective of listing is to provide liquidity and marketability to listed securities and to ensure effective monitoring of trading for the benefits of all participants in the market. A company desiring to get listing at a stock exchange has to enter into a listing agreement and is required to pay the specified listing fees. Thereafter, the company is required to comply with all clauses of the listing agreement and to send details of book closure, record dates, copy of annual report, half-year reports and cash flow statement, etc. The securities of an entity may be listed at any of the following stages :
- At the time of public issue of shares/debentures
- At the time of right issue of shares/debentures
- At the time of bonus issue
- Shares issued on amalgamations/merger
BSE Ltd. has provided for the following listing requirements for new companies :
- New companies can be listed on the Exchange, if their issue & subscribed equity capital after the public issue is Rs. 10 crores. In addition to this, the issuer company should have a post issue net worth (equity capital + free reserves excluding revaluation reserve) of Rs. 20 crores.
- For new companies in high technology (i.e., information technology, internet, e-commerce, telecommunication, media including advertisement, entertainment, etc.), the following criteria will be applicable regarding threshold limit :
- The total income/sales from the main activity, which should be in the field of information technology, internet, e-commerce, telecommunication, media including advertisement, entertainment, etc., should not be less than 75% of the total income during the two immediately preceding years as certified by the Auditors of the company.
- The minimum post-issue paid-up equity capital should be 5 crores.
- The minimum market capitalisation should be Rs. 50 crores. (The capitalisation will be calculated by multiplying the post-issue subscribed number of equity shares with the issue price).
- Post-issue net worth (equity capital + free reserves excluding revaluation reserve) of Rs. 20 crores.
Delisting of securities at the stock exchange:
On the other hand, delisting of securities means permanent removal of securities of a listed company from a stock exchange. Consequently, the security is no longer traded on the stock exchange. Delisting may be voluntary or compulsory. In the former, a listed company decides on its own to permanently remove its securities from a stock exchange. However, in the latter, there is permanent removal as a penalising measure at the behest of the stock exchange for not making submissions or comply with the requirements set out in the Listing Agreement. SEBI (Delisting of Securities) Guidelines, 2003 provides an exit mechanism, whereby the exit price for voluntary delisting of securities is determined by the promoter of the concerned company which desires to get delisted, in accordance with the book building process. The offer price has a floor price, which is average of 26 weeks average of traded price quoted on the stock exchange where the shares of the company are most frequently traded, preceding 26 weeks from the date public announcement is made. There is no ceiling on the maximum price.