Listing of the shares or bonds is a mechanism to include shares and debentures officially on the stock exchange for trading. Securities are required to be listed under Section 9 of the Securities Contract (Regulation) Act, 1956. Thus, listing simply means the inclusion of any security for the purpose of trading in a recognized stock exchange. No company is allowed to come out with a public issue (IPO) without its plan to get the shares listed for trading at a stock exchange.
Only public companies are allowed to list their securities in the stock exchange. Private Limited companies shall first convert themselves into public limited companies in order to get benefit from listing on the stock exchange. It has to pay the listing fees and comply with listing requirements on a continuous basis. Those companies which wish to list their securities have to comply with corporate governance requirements of the stock exchanges along with some other listing requirements of the stock exchange.
The prices at which the securities are traded in the stock exchange are decided by the demand and supply of securities. The prices are published in the newspapers. Investors are able to know these price trends from such publications. These prices are transmitted online too nowadays on the business channels or on the official website of the stock exchanges.
The company going for listing has to apply to the respective stock exchange and make payment of listing fees as prescribed. It is to be completed before the offer of securities to the public and registration of prospectus with the Registrar of Companies.
After approval from the stock exchange, registration and recording is done for the purpose of trading by the registered members of the stock exchange and for the official quotation of the security price for the benefit of the public and the investors. In order to refuse the listing, the authorities should intimate the company within 15 days with the reasons for refusal. The company can make an appeal to the Central Government within a prescribed period. The Central Government may either grant or refuse to grant the permission for listing and the decision of the Central Government would be informed to the stock exchange concerned that shall act in conformity with such a decision. The stock exchange has a right to suspend or withdraw an application of listing in case of any company breach or non-compliance with the listing provision. Company may further appeal to SEBI in this regard.
SEBI has initiated steps to set up a central listing authority to act as a check to enable all the stock exchanges, on which the securities of the companies and Mutual Funds are going to be listed.
All companies seeking listing of their securities on the Exchange are required to enter into a listing agreement with the Exchange. Failure to comply with the requirements invites suspension of trading, or withdrawal/delisting, in addition to penalty under the Securities Contracts (Regulation) Act, 1956. The agreement is being increasingly used as a means to improve corporate governance so as to secure the continuous listing of the securities companies to keep themselves better governed helping the investors in these companies.
The securities listed can be delisted from the Exchange as per the SEBI (Delisting of Securities) Guidelines, 2003. It can be voluntary or compulsory Delisting.
Any promoter or acquirer wishing to delist securities of the company voluntarily has to obtain approval of shareholders of the company by a special resolution passed at its general meeting. There are specific guidelines which the company has to adhere to before delisting. Most of the companies who buy back more than 90% of their shares get compulsorily delisted from the stock exchanges. However, the stock exchange may delist companies for non-compliance of listing procedures like non-payment of listing fees. This delisting may be permanent if this non-compliance is exceeded for more than 6 months. The exchange shall provide a time period of 15 days within which any person who may be aggrieved by the proposed delisting may make representation to the exchange.