Legal Aspects of Business

Securities Law

Definition: Listing involves registering securities with a stock exchange through an agreement between the company and the exchange.
Purpose:
- Ensures transferability of securities.
- Promotes transparency and open information about the company.
- Facilitates liquidity and official pricing of securities.
- Provides a marketplace for transactions.
Stock Exchange Listing:
- No limit on the number of exchanges where securities can be listed, but at least one regional stock exchange is required.
- Regional stock exchanges are those where the company is registered.
Key Legal Provisions:
- Securities Contracts Regulation Act (SCRA), 1956.
- SEBI Act, 1992.
- Companies Act, 1956.
Conditions for Listing:
- Public companies must comply with the listing agreement's terms (Section 21, SCRA).
- Companies offering securities must apply to stock exchanges before issuing a prospectus (Section 73, Companies Act).

Initial Listing: Apply for listing and register the prospectus with the ROC.
Final Listing: Enter into a listing agreement after the securities are offered to the public.
Trading: Securities are registered for trading, and price announcements are made.
Continued Listing: Remain listed until delisted by choice or regulation.

Listing enhances corporate governance.
SEBI has directed exchanges to update listing agreements to improve governance for stakeholders.

Definition: Delisting refers to removing securities from the exchange, either voluntarily or compulsorily.

Definition: A company opts to remove its securities from the exchange, often for better control and avoiding unilateral agreements.
Conditions for Voluntary Delisting:
- Securities listed for at least 3 years.
- Exit opportunity must be provided to investors, with a price determined via book-building.

Definition: The stock exchange removes a company's securities due to non-compliance.
Conditions for Compulsory Delisting:
- Suspension from trading for over 6 months.
- Non-compliance with listing norms like floating stock, minimum trading, financial aspects, and track record of compliance.

Definition: A provision that allows a company to allocate extra shares beyond the initial public offering (IPO) to stabilize post-listing prices.
Purpose:
- Allows the company to raise more capital.
- Helps in maintaining price stability after the shares are listed.
Origin: Named after Green Shoe Company, the first company to use this option.

Securities Law focuses on listing and delisting procedures, ensuring transparency, liquidity, and corporate governance.
Listing involves registering securities with exchanges to facilitate trading and compliance with regulatory standards.
Delisting can be voluntary or compulsory, depending on company actions or regulatory issues.
Green Shoe Option ensures market stability by allowing companies to issue additional shares post-IPO.