Law project on

listing and delisting

of a company

PROJECT DONE BY
HARDIK MALBARI- 10
KAAJAL JAIN - 15
MONICA JAIN-16
VINI JAIN- 18
TARUN LOHAR – 30
NIMANSHI JAIN - 56

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 Index

Listing Page no.

 Meaning 3
 Guidelines 3
 Advantages & Disadvantages of Listing 6
 Reasons for listing a company on Stock Exchange 7
 Listing Agreement 8
 Listing Rules for New Companies 11
 Listing Fees 11

Delisting
 Meaning 12
 Process 12
 Advantages & Disadvantages of Delisting 14
 Types of Delisting 15
 Reasons for Delisting 17
 Relisting of Delisted companies 18
 How to delist from Stock Exchange 19
 How to stop a Company from delisting 19
 Impact of being delisted 20

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Listing
To be able to understand the meaning of delisting, one has to first
understand the meaning of the word “Listing”.
Listing means admission of a Company’s securities to the trading platform of
a Stock Exchange, so as to provide marketability and liquidity to the security
holders.
LISTING = STOCK + COMPANY
EXCHANGES
Guidelines for Listing
Listing means admission of securities to dealings on a recognised stock
exchange. The securities may be of any public limited company, Central or
State Government, quasi governmental and other financial
institutions/corporations, municipalities, etc.

The objectives of listing are mainly to :

provide liquidity to securities;

mobilize savings for economic development; protect interest of investors by
ensuring full disclosures.

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BSE has set various guidelines and forms that need to be adhered to and
submitted by the companies. These guidelines will help companies to
expedite the fulfillment of the various formalities and disclosure
requirements that are required at various stages of
 Public Issues
 Initial Public Offering
 Further Public Offering
 Preferential Issues
 Indian Depository Receipts
 Amalgamation
 Qualified Institutions Placements

A company intending to have its securities listed on BSE has to comply with
the listing requirements prescribed by it. Some of the requirements are as
under :

I Minimum Listing Requirements for New Companies

II Minimum Requirements for Companies Delisted by BSE seeking
relisting on BSE
III Permission to Use the Name of BSE in an Issuer Company's Prospectus
IV Submission of Letter of Application
V Allotment of Securities
VI Trading Permission
VII Requirement of 1% Security
VIII Payment of Listing Fees
IX Compliance with the Listing Agreement
X Cash Management Services (CMS) - Collection of Listing Fees

[I] Minimum Listing Requirements for New Companies

 The minimum post-issue paid-up capital of the applicant company
(hereinafter referred to as "the Company") shall be Rs. 10 crore for
IPOs & Rs.3 crore for FPOs; and
 The minimum issue size shall be Rs. 10 crore; and

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  The minimum market capitalization of the Company shall be Rs.
25 crore (market capitalization shall be calculated by multiplying the
post-issue paid-up number of equity shares with the issue price).

[II] Minimum Requirements for Companies Delisted by BSE

seeking Relisting on BSE
 Companies delisted by BSE and seeking relisting at BSE are required to
make a fresh public offer and comply with the extant guidelines of
SEBI and BSE regarding initial public offerings.

[III] Permission to Use the Name of BSE in an Issuer

Company's Prospectus
 Companies desiring to list their securities offered through a public
issue are required to obtain prior permission of BSE to use the name of
BSE in their prospectus or offer for sale documents before filing the
same with the concerned office of the Registrar of Companies.

[IV] Submission of Letter of Application

 As per Section 73 of the Companies Act, 1956, a company seeking
listing of its securities on BSE 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.

[V] Allotment of Securities

 As per the Listing Agreement, a company is required to complete the
allotment of securities offered to the public within 30 days of the date
of closure of the subscription list and approach the Designated Stock
Exchange for approval of the basis of allotment.

 In case of Book Building issues, allotment shall be made not later than
15 days from the closure of the issue, failing which interest at the rate
of 15% shall be paid to the investors.

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[VI] Trading Permission
 As per SEBI Guidelines, an issuer company should complete the
formalities for trading at all the stock exchanges where the securities
are to be listed within 7 working days of finalization of the basis of
allotment.

[VII] Requirement of 1% Security

 Companies making public/rights issues are required to deposit 1% of
the issue amount with the Designated Stock Exchange before the issue
opens. This amount is liable to be forfeited in the event of the
company not resolving the complaints of investors regarding delay in
sending refund orders/share certificates, non-payment of commission
to underwriters, brokers, etc.

[VIII] Payment of Listing Fees

 All companies listed on BSE are required to pay to BSE the Annual
Listing Fees by 30th April of every financial year as per the Schedule of
Listing Fees prescribed from time to time.

ADVANTAGES AND DISADVANTAGE OF LISTING IN

STOCK EXCHANGE
Advantages
 shareholders enjoy limited liability
 additional capital can be raised by issuing more shares or debentures
 it enjoys greater borrowing power
 board of directors with expertise/experience can be appointed to take
decisions and delegates responsibilities
 shareholders can sell/transfer their shares freely
Disadvantages
While private companies may also issue their securities as compensation for
services, the recipients of those securities often have difficulty selling them
on the open market. Securities from a public company typically have an
established fair market value at any given time as determined by the price
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the security is sold for on the stock exchange where the security is traded.
The financial media and city analysts will be able to access additional
information about the business.
Disadvantages continued:
 loss of overall ownership and control of the business (the personal
touch may be lost)
 decisions, due to bureaucracy, take longer and there may be
disagreements
 significant expenses are incurred when setting up a company (legal,
accountants, taxes, consultants, etc.)
 more statutory regulations to conform to
 more people to share profits with (less income)
 financial affairs must be disclosed publicly (this information could be
used to competitors advantage)
 published accounts must to be prepared (time consuming and costly)

Reasons for listing a company on stock exchange

Listing or Stock Exchange Listing, as many people call it, is the process of
making a transition from a private organization to a publicly-owned entity
wherein all or some shares of the company can be traded in the stock
exchange. The ability to have the company's shares traded in the stock
exchange is fundamental to an organization's decision to have the company
listed.These are 8 reasons why you should list your company in the stock
exchange.
 Capital Growth
Stock Exchange listing provides opportunities to both the investor and the
listing company. The listed company finds a great opportunity to increase its
primary capital for market's organic growth and acquisition funding
 Corporate Profile Elevation
Stock Exchange Listing generally raises the public profile of the organization
with their customers, investors, suppliers and media. Companies listed in the
stock exchange usually become a part of analyst reports and are usually
included in the index.

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  Improvement in the Company Valuation
Generating an independent valuation becomes possible when a company is
listed in the Stock Exchange.
 Institutional Investment
It is easier for an organization to attract institutional investors or other
companies who wish to invest on other companies. This simply means
availability of both expertise and capital.
 Trading Platform
Many stock exchange companies offer an ideal trading platform for the
company's shares. These companies also give their shareholders a great
opportunity to realize the value of their shareholdings, which eventually, can
help the company expand its shareholder base.
 Alignment of management/employee interests
The process of compensating the company executives, directors and
employees with shares becomes simple, making it easier and more flexible to
align the company employees' interests with the goals and objectives of the
organization.
 Reassurance of Suppliers and Customers
The organizations listed in the Stock Exchange generally find improvement
in their business and financial strength.
 Exit Strategy for Investors
Stock Exchange listing provides the founders and investors of the company a
mechanism to easily exit their investments.

LISTING AGREEMENT
Listing of Securities:
Listing means admission of securities for dealings on specified stock
exchanges. The securities maybe of a public limited company, Central/State
Government, quasi governmental and other financial institutions
/corporations/municipalities, etc.

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Importance of Listing Agreement:
1. Through this agreement company undertakes to provide prompt facilities
like transfer, consolidation, sub-division, consolidation of securities.
2. Provide proper notice for record dates and book closure.
3. Furnish accounts on quarterly basis.
Various Important Clauses of Listing Agreement:
Clause 16:
· Give notice to SE stating the date & purpose for register closure or of record
date.
· SE to be intimated at least 7 days before such closure or record date.
 for purposes of declaration of dividend or
 the issue of right or bonus shares or
 issue of shares for conversion of debentures or of shares arising out of
rights attached to debentures.
Clause 19:
 Prior intimation to the Exchange about the Board Meeting at which
proposal for Buyback of Securities, declaration/recommendation of
Dividend or Rights or issue of convertible debentures or of debentures
carrying a right to subscribe to equity shares or the passing over of
dividend or the issue of right is due to be considered at least 2 working
days in advance.
 Simultaneous notice in case of proposal of declaration of Bonus is
communicated to the Board of Directors
Clause 20 & 22
 Under Clauses 20 and 22 of the Listing Agreement companies are
required to intimate to the stock exchange, immediately after the
meeting of Board of
 Directors, regarding the decisions taken in respect of declaration of
dividend or rights or bonus etc. In order to avoid excessive volatility in
stock prices due to announcement regarding dividend, rights etc.,
during the Market Hours, such announcement shall be made
immediately on the date of the Board Meeting only after the close of
the Market Hours.
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Clause 35:
 Within 21 days from the end of every quarter, file the shareholding
pattern of the company with the Stock Exchanges.
Clause 40A:
 The provision requires a company to maintain on a continuous basis,
public shareholding of at least 25% of the total number of issued shares
of a class or kind, for every such class or kind of its shares which are
listed.
Clause 41
 The quarterly financial result of the company is required to include
details of promoters and promoter group shareholding including the
details of pledged shares, as specified in the annexure.
 To make announcement to SE regarding quarterly unaudited financial
result within 15 minutes of closure of Board Meeting.
 To publish unaudited/audited financial results in one English daily
newspaper circulating in whole of India.
 Companies shall be required to furnish segment wise Revenue, Results
and Capital Employed along with and as a part of the quarterly
financial results
Clause 47(a)
 Appointment of Company Secretary to act as Compliance Officer &
will be responsible for monitoring share transfer process & report to
company’s Board of directors in each meeting.
Clause 47(c)
 To ensure that the RTA or the in-house share transfer facility produces
a certificate from Practicing company secretary certifying that all share
certificates have been issued within one month of the date of lodgment
for transfer, sub-division, consolidation, renewal, exchange or
endorsement of calls/allotment monies and a copy of the same shall be
made available to the Exchange within 24 hours of the receipt of the
certificate by the Company

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Listing Rules for New Companies
The following eligibility criteria have been prescribed for the companies
seeking permission to get listed on the stock exchange, effective August 1st
2006.
The companies are classified into two categories: Large Cap and Small Cap. A
company is treated as a large cap company if the issue size is greater than or
equal to Rs 10 crore and Market capitalization of not less than Rs 25 crore.
a) In case of Large Cap Companies
The minimum post-issue paid-up capital of the applicant company shall be
Rs. 3 crore.
The minimum issue size shall be Rs. 10 crore; and
b) In respect of Small Cap Companies
The minimum post-issue paid-up capital of the Company shall be Rs. 3 crore
The minimum issue size shall be Rs. 3 crore
The minimum market capitalization of the Company shall be Rs. 5 crore
The minimum number of public shareholders after the issue shall be 1000.
c) For all companies
In respect of the requirement of paid-up capital and market capitalization,
the issuers shall be required to include in the disclaimer clause forming a
part of the offer document that in the event of the market capitalization
(product of issue price and the post issue number of shares) requirement of
BSE not being met, the securities of the issuer would not be listed on BSE.
The applicant, promoters and/or group companies, shall not be in default in
compliance of the listing agreement.

Listing fees
The listing fees depend on the companies paid up capital at both NSE and
BSE. While the initial listing fee at NSE is Rs.7,500, it is Rs.20,000 at BSE.
The annual listing fees for a company with a paid up capital upto Rs. 5
Crores is Rs. 10,000 at BSE while it is Rs. 8,400 at NSE. For a company with
paid up capital between 5 to 10 crores, BSE charges Rs. 15,000 while NSE
charges

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Delisting
“Delisting” is totally the reverse of listing. To delist means permanent
removal of securities of a listed company from a stock exchange. As a
consequence of delisting, the securities of that company would no longer be
tradeable at that stock exchange.

DELISTING = STOCK - COMPANY

EXCHANGES
"Delisting" i.e. the said removal from a Stock Exchange, may be Voluntary
(i.e. at the will of the Company) or Compulsory (i.e. out of a penal action by
the Stock Exchanges, for the reason of any violations/ lapses).

Process
A recognized stock exchange may, by order, delist any equity shares of a
company on any ground prescribed in the rules made under section 21A of
the Securities Contracts (Regulation) Act, 1956 .
Constitution of Panel (Regulation 22 (2))
The decision regarding compulsory delisting shall be taken by a panel to be
constituted by the recognized stock exchange consisting of -

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Two directors of the recognized stock exchange (one of whom shall be a
public representative);
One representative of the investors;
One representative of the Ministry of Corporate Affairs or Registrar of
Companies; and
Public notice before delisting order (Regulation 22 (3))
Before making a delisting order the recognized stock exchange shall give a
notice in one English national daily with wide circulation and one regional
language newspaper of the region where the concerned recognized stock
exchange is located and shall also display such notice on its trading systems
and website.
Time period of making representation (Regulation 22 (3))
Time period of not less than fifteen working days from the notice, be given
to any person who may be aggrieved by the proposed delisting within which
he can made representations to the recognized stock exchange which has
issued a notice for the delisting.
Delisting Order by the Recognised Stock Exchange (Regulation 22 (4))
The recognized stock exchange passes an order under sub-regulation (1) after
considering the representations, if any made by the company and any
aggrieved person in response to the notice and after considering the
following points:-
Nature and extent of the alleged non-compliance of the company and the
number and percentage of shareholders who may be affected by such non-
compliance.
The status of compliance of the company with the office of the concerned
Registrar of Companies.
Public notice after Delisting Order (Regulation 22 (6))
Where the recognized stock exchange passes the delisting order, it shall, -
(a) Forthwith publish a notice in one English national daily with wide
circulation and one regional language newspaper of the region where the
concerned recognized stock exchange is located.
(b) Inform all other stock exchanges where the equity shares of the company
are listed, about such delisting and the surrounding circumstances.
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Disclosures to be made in the notice
 Facts of such delisting,
 The name and address of the company,
 The fair value of the equity shares determined under sub-regulation (1)
of regulation 23 and
 The names and addresses of the promoters of the company who would
be liable under sub-regulation (3) of regulation 23.
Important points:-
 No open offer is required to be given by the Delisted company in the
case of compulsory delisting made by a recognized stock exchange.
 Where a company has been compulsorily delisted the company, its
whole time directors, its promoters and the companies which are
promoted by any of them shall not directly or indirectly access the
securities market or seek listing for any equity shares for a period of
ten years from the date of such delisting.
Advantages and disadvantages of delisting
At a first glance, delistings seem to bring a round of disadvantages for the
equity market, especially if the first effect is the reduction of number of
active issuers.

“The main reason is the narrow size of deals in the local market. At least at a
first glance. Instead, if we consider the total number of issuers, we can say
we have a record number of companies listed at the stock market. Under
these conditions, delisting can be seen as an effective solution as it washes
out the market from companies with low liquidity.

“I would rather prefer the variant of larger tradable volume and fewer issuers
than what we see now”, Lupsan continued.

The main disadvantage is that the company could no longer get the
financing through stocks market (a fast and cheap solution).

“In addition, the company will become less attractive to minority

shareholders.

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Types of Delisting the Companies

Listing of Companies denotes permission granted by a stock exchange, to a

company, for trading of its particular securities (e.g. equity shares,
debentures etc.) on the stock exchange. Delisting of Companies refers to
the removal of a company's shares from listing on the stock exchanges,
either voluntarily or involuntarily.Delisting can be carried out in two ways:

Voluntary Delisting
Compulsory Delisting

In voluntary delisting, the company or its promoters or any other persons

other than stock exchange can choose to remove its securities from the
stock exchange. SEBI Guidelines has prescribed its mode, procedure &
manner to be adopted by the company. The final exit price is to be paid to
the shareholder, which is decided through reverse book building method.

Compulsory delisting can be initiated by the stock exchanges by the

companies with terms of Listing Agreement only for default whereby the
trading has been suspended for more than six months or as per the norms
laid down in the SEBI Guidelines.

Delisting may also result as a consequence of Amalgamation, demerger

merger, or Winding up of the Company.

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 Comparison between Voluntary and Compulsory Delisting

S. No Criteria Compulsory Delisting Voluntary Delisting from all the Exchange(s)

1. Applicable Regulations 22 to 24 Regulations 5 to 21

Regulations

2. Initiative Action Any Recognized Stock Exchange Any Company can voluntarily apply to the
makes an order to delist the concerned stock exchange(s) for delisting.
equity shares of a company.

3. Grounds Delisting order can be made on The Company either for cost benefit, or to
the non-fulfillment of the listing comply with any of the rules and regulations etc
regulations of the respective may seek delisting from any of the exchange.
exchange and on any other
ground prescribed in the rules
made under section 21A of
SCRA, 1956.

4. Public Notice Public Notice in this case be Public notice and all announcements be given by
given by the Exchange the Promoters of the company.

5. Approvals The Panel of Experts has to take The Company seeking voluntary delisting shall
the decision after giving a take the approval of the concerned stock
reasonable opportunity of being exchange(s) and also of public shareholders.
heard to all the persons who
may be aggrieved by the
Delisting of the company.

6. General Meeting No need of the General meeting Shareholders resolution to be passed through
of the of the shareholders Postal ballot.
shareholders

7. Appointment of The complete process is The complete process is monitored by the

Merchant monitored by the Panel of Merchant Bankers
Banker Experts

8. Exit Price To be calculated by the The price to be determined on the basis of the
Independent valuer at which the past trading data or book values of the company
Promoter should take the shares by the promoters in consultation by the
from the Public shareholders. Merchant Banker

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Reasons for delisting:
In the last decade, we have seen numerous cases where listed subsidiaries of
multinational companies (MNCs) got delisted from Indian stock markets.
Companies such as Reckitt Benckiser, Cadbury, Philips, Panasonic, Ray Ban,
Otis and Carrier were once listed on the Indian bourses. Some of these
companies were dream businesses in which investors would have happily
parked their funds and slept well in the night. In this article, we will
highlight the possible reasons behind delisting of MNCs from Indian
bourses.
Lenient FDI norms and removal of sector caps
In the first place it is important to understand the reason behind MNCs
getting listed in the Indian stock markets. Two decades back, foreign
companies eager to set up their shops in India had restrictions to operate
alone. They had to adhere to the foreign direct investment (FDI) policy that
had an upper cap on the maximum ownership by a foreign entity. They
could not have owned 100% of the business entity in India. This requirement
led many foreign companies to list their subsidiary in India.

Strategic move for greater independence and lower costs

For a company to stay listed, the company has to adhere to a lot of rules and
regulations. There are various forms of compliance to be met with BSE, NSE,
SEBI and other regulatory bodies. Timely information is to be disclosed to
the shareholders (e.g.: annual report, quarterly results, etc). Approvals are
mandatory for taking significant investment decisions like M&A, raising
funds among others. So if the MNCs have enough financing support from
their parent company and do not require financing from the Indian capital
market, it makes sense for them to delist.
Depressed market conditions
Whenever we see the stock markets falling due to various reasons, almost all
the stocks get beaten down. These suppressed stock market conditions lead
to pessimism among investors who just want to get out of equities. Most
investors do not differentiate between the good and the bad in that kind of
pessimistic environment. Promoters of MNCs use this kind of
undervaluation to their advantage. They acquire the remaining shares at
lower valuations and apply for delisting.

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RELISTING OF DELISTED COMPANIES
DEFINATION:-
The return to listed status for a stock after having been delisted from an
exchange for not being in compliance with the exchange's listing
requirements. A company's stock may be delisted either by the exchange or
voluntarily for a number of reasons including bankruptcy, failure to file
mandatory reports, or a depressed share price that is below the exchange's
minimum threshold. Once the company puts its house in order and meets
the listing requirements, it can apply to relist its shares

RULES AND REGULATIONS

Companies cannot relist themselves on the bourses for up to ten years after
their delisting, instead of two years as was the case earlier.
The re-listing of a company can be done only after ten years, if its delisting is
compulsory or initiated by the bourses, while in cases of voluntary delisting,
the companies can list themselves again after a gap of five years.
As per the new delisting norms framed by the Securities and Exchange Board
of India , small companies and those getting delisted due to winding-up or
operation of law, can also get listed again after five year.
Under the earlier guidelines, the companies could apply for relisting of
shares on stock exchanges after two years of cooling period.
The regulator has increased the cooling period for companies seeking
relisting of shares in its new Sebi (Delisting of Equity Shares) Regulations
2009, which replaces the guidelines issued in 2003.
The regulations further said a company could be delisted only if a promoter
hikes its stake to 90 per cent or acquires at least 50 per cent through a share
purchase offer aimed at giving the shareholders an exit opportunity
Regulation 24 prescribe the Consequences of Compulsory Delisting as under:
Where a company has been compulsorily delisted under this Chapter, the
company, its whole time directors, its promoters and the companies which
are promoted by any of them shall not directly or indirectly access the
securities market or seek listing for any equity shares for a period of ten
years from the date of such delisting.
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The prescribed consequences are too severe in the sense that the promoters
and even Directors cannot access the securities market or seek listing for a
period of 10 years. Even the status of Nominee or Independent Directors has
not been clarified.

How to Delist From the Stock Exchange

Delisting from the stock exchange can save a company a considerable
amount of money and reduce paperwork.

Companies can be forced to delist from a stock exchange for a number of

reasons, such as falling stock prices, failure to meet capitalization rules and
so forth. But it is also possible for a company to voluntarily delist from a
stock exchange. Delisting means that a company no longer has to pay the
rather steep fees involved in being listed on an exchange. A delisted
company no longer needs to file financial reports with the Securities and
Exchange Commission, which oversees companies listed on the stock
exchanges. The process for delisting a company is not terribly difficult, but
must be followed precisely.

How to Stop a Company From Delisting

To avoid delisting, publicly listed companies must meet all of the exchange's
continued listing requirements.

To remain listed on a stock exchange such as the New York Stock Exchange,
companies must adhere to a series of continued listing requirements. Stock
exchanges normally have a combination of quantitative and qualitative
continued listing criteria. If any of these conditions is unmet, a listed
company may come under scrutiny for delisting. In such situations, the
management must promptly resolve the unmet conditions in order to
remain listed.

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Impact of Being Delisted
Many times when a company is delisted, it faces punishment from its
creditors, making it more difficult to raise capital for operations and growth.
For example, when a company is delisted, its creditors can sometimes
withdraw lines of credit and ratings agencies can downgrade its credit score,
making it more expensive to borrow money. A company can survive
delisting, but typically, being delisted is a signal to investors that the
company is in trouble.

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