Listing of securities is a fundamental concept in securities law and plays a pivotal role in fostering market integrity, protecting investors and enhancing market efficiency. In the context of Indian law, the listing of securities refers to the official admission of a security to the trading platform of a recognized stock exchange.
Legal Framework for Listing of Securities in India
The Securities and Exchange Board of India (SEBI), the regulator for securities market in India, governs the listing and delisting of securities in India. The SEBI Act, 1992, along with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, are the primary legal documents regulating the listing of securities in India.
Conditions for Listing of Securities
As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, any company seeking to list its securities on a recognized stock exchange in India must fulfil certain conditions. These include:
Compliance with the Securities Contracts (Regulation) Act, 1956: The company must comply with all the provisions and conditions stipulated in the Securities Contracts (Regulation) Act, 1956, and rules made thereunder.
In-principal approval: The issuer should obtain an in-principal approval of the stock exchanges where it proposes to list its securities.
Filing of Draft Prospectus: The issuer must file a draft prospectus with SEBI and stock exchange(s), and must receive observations from SEBI on the same.
Agreement with the Stock Exchange: The issuer must enter into a listing agreement with the stock exchange. This agreement sets forth the rights, duties and obligations of both the issuer and the stock exchange.
Advantages of Listing Securities
Listing of securities brings with it several advantages:
Improves Liquidity: Listed securities can be readily bought and sold on a recognized stock exchange, enhancing liquidity for the investors.
Price Discovery: Listing helps in the price discovery of the securities as it is based on the demand and supply mechanism in the market.
Access to Capital: Listing helps the issuers in raising capital from the public. It provides an opportunity for the company to expand and grow.
Increased Visibility and Credibility: Listing enhances a company's visibility and credibility in the market and among its investors.
Sahara India Real Estate Corporation Ltd & Ors v. SEBI: In this landmark case, the Supreme Court of India held that any company intending to list its securities on the stock exchanges must strictly comply with the SEBI guidelines and regulations.
SEBI v. Shriram Mutual Fund: In this case, the Supreme Court held that SEBI has the power to regulate and monitor the listing and delisting of securities to protect the interests of investors.
In conclusion, the listing of securities in India is an intricate process governed by SEBI and involves rigorous scrutiny of the issuer company. It is aimed at investor protection and maintaining market integrity.