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Module- II
Listing of Securities
Mr Shamsuddin

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Introduction
Listing of securities means that the securities
are admitted for trading on a recognized stock
exchange. Transactions in the securities of any
company cannot be conducted on stock
exchanges unless they are listed by them.
Hence, listing is the very basis of stock
exchange operations. It is the green signal given
to selected securities to get the trading privileges
of the stock exchange concerned. Securities
become eligible for trading only through listing.
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Introduction
Listing is compulsory for those companies which
intend to offer shares/ debentures to the public
for subscription by means of issuing a
prospectus. Moreover, the SEBI insists on listing
for granting permission to a new issue by a
public limited company. Again, financial
institutions do insist on listing for underwriting
new issues. Thus, listing becomes an
unavoidable one today.
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Introduction
The companies which have got their shares/
debentures listed in one or more recognised
stock exchanges must submit themselves to the
various regulatory measures of the stock
exchange concerned as well as the SEBI. They
must maintain necessary books, documents etc.
and disclose any information which the stock
exchange may call for.

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Group A, Group B and Group C Shares (BSE)

The listed shares are generally divided into two
categories namely:
(i) Group' A shares (Specified shares or cleared
securities) .
(ii) Group B shares (Non-specified shares or
non-cleared securities).

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Group A shares represent large and well established companies

having a broad investor base. These shares are actively traded.
Naturally, these shares attract a lot of speculative multiples.
These facilities are not available to Group B shares. However,
shares can be moved from Group B to Group A and vice versa
depending upon the criteria for shifting.
For instance, the Bombay Stock Exchange has laid down several
criteria for shifting shares from Group B to Group A, such as, an
equity base of Rs. 10 crores, a market capitalization of Rs. 25-30
crores, a public holding of 35 to 40 per cent, a shareholding
population of 15,000 to 20,000, good dividend paying status etc.
Group B2 shares are again divided into B1 and B shares on the
Bombay Stock Exchange. B1 shares represent well traded scrips
among the B Group and they have weekly settlement.

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Apart from the above, there is another group called

Group C shares. Under Group C, only odd lots and
permitted securities are included. A number of shares
that are less than the market lot are known as odd lots.
Market lot refers to the minimum number of shares of a
particular security that must be transacted on a stock
exchange. Odd lots have settlement once in a fortnight
or once on Saturdays. Permitted securities are those that
are not listed on a stock exchange but are listed on other
stock exchanges in India. So they are permitted to be
traded on this stock exchange. Odd lots cannot be easily
transacted on the stock exchange and so they are illiquid
in nature.
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Advantages of Listing

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Advantages of Listing
The advantages of listing may be summarised as
follows: (i) Facilitates Buying and Selling Securities:- Listing
paves way for easy buying and selling of securities.
Constant marketing facilities are assured for listed
securities:
(ii) Ensures Liquidity:- The prices of listed securities
are quoted daily in the market. Hence, securities can be
converted into cash readily at quoted prices and. thus
listing ensures liquidity.

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(iii) Offers wide Publicity

Listed securities give wide publicity to the companies
concerned. It is so because the names of listed
companies are frequently mentioned in stock market
reports, T.V., Newspapers, Radio, etc. This has an
advertising effect for such companies and this will
automatically widen the market for their securities.
According to Hasting, "A listed security will receive more
attention from investment advisory services than an
unlisted one".

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(iv) Assures Finance:- The very fact that a security is

listed in a recognised stock exchange adds to the
prestige of that company and it enables the company to
raise the necessary finance by the issue of such
securities expeditiously.
(v) Enables Borrowing:-Listed securities are preferred
as collateral securities by commercial banks and other
lending institutions because they are rated high in
market quotations and there is a ready market for them
also. Thus borrowings are made easier against the
securities of the listed companies.

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(vi) Protects Investors

Listing companies have to necessarily submit
themselves to the various regulatory measures by
disclosing vital informations about their assets, capital
structure, profits, dividend policy, allotment procedure,
bonuses etc. Hence, listing aims at protecting the
interest of investors to a greater extent.

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Drawbacks/ Disadvantages
of listing

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(i) Leads to Speculation

Listed securities offer wide scope for the
speculators to manipulate the values in such a
way as may be detrimental to the interests of the
company. In such a situation, artificial forces
playa more dominant role than the free market
forces. The stock market may not reflect the true
picture of a listed security. Again, the managerial
personnel may themselves indulge in speculative
activities with regard to listed securities by
misusing the inside information available to them.
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(ii) Degrades Company's Reputation

Some times listed securities are subject to wide
fluctuations in their values. They may become a
victim of depression. They are immediately
reflected on the stock exchange whereas
unlisted securities escape from this misery.
These wide fluctuations in their values have the
effect of degrading the company's reputation
and image in the eyes of the public as well as
the financial intermediaries.
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(iii)
Discloses
Vital
Informations
to
Competitors
For getting the securities listed, a company has to
disclose vital informations such as, dividends and
bonuses declared, a brief history of the company,
sales, remuneration to managerial personnel and
so on. It amounts to leaking of secrecy of the
company's operations to trade rivals. Even trade
unions may demand higher wages and bonus on
the basis of these informations. Thus, listing may
prove disadvantageous to a company.
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LISTING PROCEDURE

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The company concerned must apply in the prescribed

form along with the following documents and details:
(i) Certified copies of Memorandum and Articles of
Association, Prospectus or Statement in lieu of
Prospectus, Underwriting agreements, agreements with
vendors and promoters etc.
(ii) Specimen copies of shares and debenture
certificates, letter of call, allotment, acceptance and
renunciation.
(iii) Copies of balance sheets and audited accounts for
the last 5 years.

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(iv) Copies of offers for sale and circulars or

advertisements offering any securities for subscription or
sale during the last 5 years.
(v) Certified copies of agreements with managerial
personnel.
(vi) Particulars of dividends and bonuses paid during the
last 10 years.
(vii) A statement showing dividends or interest in arrears
if any.
(viii) A brief history of the company since its
incorporation, giving details of its activities.

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(ix) Particulars regarding its capital structure.

(x) Particulars of shares and debentures for which
permission to deal is applied for and their issue.
(xi) A statement showing the distribution of shares along
with a list of highest 10 holders of each class or kind of
securities of the company stating the number of
securities held by them.
(xii) Particulars of shares forfeited.
(xiii) Certified copies of agreements if any with the
Industrial Finance Corporation, ICICI etc.
(xiv) Listing agreement with the necessary initial and
annual listing fee .
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Criteria for Listing

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A company which desires its securities to be listed on a

recognised stock exchange must satisfy the following
conditions:
(i) At least 60% of each class of securities issued must be
offered to the public for subscription and the minimum
issued capital should be Rs. 3 crores.
(ii) The minimum public offer for subscription must be at
least 25% of each issue and it must be offered through
advertisement in newspapers atJeast for a period of 2
days.
(iii) The company should be of a fair size having broad
based capital structure and public interest in its securities.
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(iv) There must be at least 10 public shareholders for

every Rs. 1 lakh share of fresh issue of capital and it is
20 in the case of subsequent issue of shares. This
criterian is different for investment companies.
(v) A company having more than Rs, 5 crore paid up
capital must list its securities on more than one stock
exchange. Listing on the regional stock exchange is
compulsory.
(vi) The company must pay interest on the excess
application money received at the rates ranging between
4% and 15% depending on the delay beyond 1:0 weeks
from the date of closure of the subscription list.
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(vii) The Articles of Association of the company must provide for the
following:
(a) A common form of transfer shall be used.
(b) Fully paid shares will be completely free from lien.
(c) Partly paid up shares will be subject to lien only to the extent of
call money due at a fixed time.
(d) Calls in advance carry only interest and not dividend rights.
(e) Unclaimed dividends shall not be forfeited before the claim
becomes time barred.
(f) The right to call of shares shall be given only after the necessary
sanction by the general body meeting.
(g) Transfer of shares shall be registered within 30 days of deposit
of request and the balance certificates shall be issued within the
same period.
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(viii) The existing companies must adhere to the

ceiling in expenditure of public issues.
(ix) A certificate to the effect that shares from
promoter's quota are not sold or transferred for a
period of 3 years must be submitted.

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Listing Obligations

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The Company has to compulsorily notify the stock

exchange: (i) the date of the board meeting at which the declaration
or recommendation of dividend or the issue of right or
bonus share will be considered.
(ii) any change in the company's directorate or
managerial personnel by death, resignation, removal or
otherwise.
(iii) any issue of new shares, rights shares or otherwise
as well as the issue of any privileges or bonuses to
members, even before they are intimated to
shareholders.
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(iv) any change in the company's capital structure.

(v) any material change in the general character or nature of
the company's business.
(vi) any re-issue of forfeited securities or the issue of any
other securities held in reserve for future issue.
(vii) any action which will result in the redemption,
cancellation or retirement of any securities listed on the
stock exchange.
(viii) any intention to make a drawing of listed securities.
(ix) any other information necessary to enable the
shareholders to appraise the company's position so as to
avoid the establishment of a false market in the shares of
the company.
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(x) In addition to the above, the company has to forward to

the stock exchange:
(a) copies of all notices and circulars sent to the
shareholders including the proceedings of ordinary and
extraordinary general meetings.
(b) certified copies of all resolutions passed by the company
as soon as such resolutions become effective.
(c) copies of statutory and annual reports and annual
audited accounts as soon as they are issued as well as the
director's report.
(d) annual return of at least 10 principal holders of each
class of security of the company.

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Additional Obligations

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The company must satisfy the following additional

conditions:
(i) The company must recommend or declare all dividends/
cash bonuses, at least, 5 days before the commencement of
the closure of its transfer books.
(ii) The company must advise the stock exchange in writing
of all such dividends/cash bonuses recommended or
declared immediately after the Board meeting has been held.
(iii) The company must close the transfer books only for the
purpose of declaration of dividend or for the issue of
rights/bonus shares.
(iv) The company must grant to shareholders the right of
renunciation in all cases of rights issue.
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(v) The company must undertake to maintain all letters of

allotment, regret, acceptance and rights serially and to
issue letters of allotment and regret simultaneously at
the same time.
(vi) The company must issue receipts for all securities
deposited for registration/exchange/sub-division or for
any other purpose and it should not charge any fee for it.
The recognised stock exchange has power to call for
such other information as may be necessary or to
produce further documents in the interest of the
investors. In such a case, the company concerned must
comply with those requirements also.
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Thank You

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