A To Z of Listing Compliances in India

What Is A Listing Agreement?

A Company seeking listing of their securities on the Stock Exchange is required to enter into a formal listing agreement with the Stock Exchange. Such listing agreement specifies all the quantitative and qualitative requirements to be continuously complied with by the issuer for continued listing. The Stock Exchange then monitors such compliance and company who do not comply with the provisions of the listing agreement may be suspended from trading on the Stock Exchange. Listing agreements are therefore increasingly used as a means to improve corporate governance.

As per Companies Act, 2013 “Listed Company”[1] means company that has its securities listed on any recognized stock exchange. As per the said act only public companies are permitted to list their securities in stock exchange. Private company cannot avail this option. In order to list their securities they need to first convert themselves into public limited companies and their Articles of Association should also be amended in order to accommodate  contain prohibitions as laid down in the listing agreement and as applicable to public limited companies.

Compliances To Be Done By A Listed Company

In this Article I have tried to simplify and cull out all the major compliances that are required to be complied with by  listed companies in a tabular form for easy reference.

Following are the major compliances to be followed pursuant to the listing agreement-

Clauses Subject Matter Requirement
1

Share allotment

Regret Letters

Notification in Press

Rejection letters to be posted with allotment letters.
5A Shares which are left unclaimed and are lying in escrow account The issuer-

Shall send at least three reminders at the address given in the application form and depository’s database.

In case of no response crediting of unclaimed shares to demat suspense account

13 Notification of any attachment or prohibiting orders against transfer of securities. Notify any attachment or prohibitory order restraining transfer of securities.
16 Book closer/ Record Date Atleast once in a year the books should be closed.

Time- At least 7 working days in advance

Minimum time gap between two book closures is at least 30 days.

19 Convening of a Board Meeting for declaration Intimate at least 2 days in advance .
20&22 Decision regarding declaration of dividend, bonus interest payment buy-back of securities, rights, re-issue of forfeited shares, calls to be made Furnish information to the stock exchange within 15 minutes of the closer
20A Uniformity in dividend declaration Declaration on per share basis.
21 Payment of interest on debentures/bonds, redemption amount of redeemable shares or debentures/bonds Intimate at least 21 days in advance.
25 Granting options to purchase any shares of the company Notify all the listed exchanges.
27 Any action resulting in redemption cancellation or retirement in whole or in part of listed securities, or intention to make withdrawal of such securities Notify all the listed exchanges.
28 Change in form or nature of listed securities or change in rights/ privileges thereof Apply to exchange for listing of the securities as changed.
28A In case of superior rights as to voting or dividend vis-avis the rights on equity shares that are listed which may confer on any person Company shall not issue shares in any manner.
29&30 Change in general. characters or nature of company’s business

Change in the company’s directors

Change of Managing Director

Change of Auditors

Promptly notify the exchange of these changes
31 Further issue of securities and other documents to be forwarded. (a) To forward to the exchange six copies of Statutory and to Directors’ Annual Reports along with Form A which contains the Unqualified /Matter of emphasis Report and Form B containing the qualified/ Subject to/ Except for Audit Report, as applicable, Balance sheets and P& L Accounts, all periodicals and special reports, notices, resolutions and circulars relating to new issue of capital,

(b) Three copies of all the notices, call letters etc. including notices of meetings convened u/s 230 or section 232 read with section 230 of the Companies Act, 2013, copy of the proceedings at all Annual and Extraordinary General Meetings of the Company,

(c) Three copies of all notices, circulars, etc., issued or advertised in the press either by the Company, or by any company which the Company proposes to absorb or with which the Company proposes to merge or amalgamate, or under orders of the court or any other statutory authority in connection with any merger, amalgamation, re-construction, reduction of capital, scheme or arrangement.

Time- As soon as possible/promptly

Annual reports will be supplied in soft copies to the shareholders who have registered their email addresses and hard copies to those who have not.

31A Restatement of books of accounts

The company agrees to restate its books of accounts on the directions issued by SEBI or by any statutory authority as per the provisions of the extant regulatory framework.

32

Cash Flow Statement in the Annual Report Consolidated Financial Statement and related party disclosures  Companies to prepare Cash Flow Statement in, accordance with AS-3 of ICAI and present it under the indirect method. Companies to send a statement containing the salient features of the Balance Sheet, P&L A/c and Auditors’ Report to each share holder. Unabridged Annual report to be sent to member of listed exchange on his request. Company will publish Consolidated Financial Statements duly audited by the statutory auditors and file the same with Stock Exchange.

Company will also make related party disclosures in its Annual Reports.

Time- ASAP

35 Shareholding pattern containing details of promoters holding and non-promoters holding File with the exchange the shareholding pattern in the prescribed form

One day prior to listing of its securities on the stock exchange

Within 21 days from the end of the quarter on a quarterly basis

Within 10 days of any capital restructuring of the company resulting in a change exceeding +/– 2% of the total paid-up share capital.

The format for reporting the shareholding pattern must include details of shares pledged =by the promoters and promoters group and is required to be given for each class of security separately. The additional format should disclose the voting right pattern in the company

35A Details of voting results The company should submit to the stock exchange, within 48 hours of conclusion of its General Meeting, details regarding the voting results in the prescribed format.
35B E-voting facility to be provided to the shareholders in respect of all shareholder’s resolution to be passed General Meeting or through postal ballot The company should continue to ensure–

To enable those shareholders, who do not have access to e-voting facility, to send their assent or dissent in writing on a postal ballot as per the provisions of the Companies (Management and Administration) Rules, 2014 or amendments made there to.

To utilize the service of any one of the agencies providing e-voting platform, which is in compliance with conditions specified by the Ministry of Corporate Affairs, Government of India, from time to time.

To mention the Internet link of such e-voting platform in the notice to their shareholders

35C Compliance with SEBI (Employee Stock Option Schemes and Employee Stock Purchase Schemes) Guidelines, 1999

All the employee benefit scheme involving the securities of the company & already framed & implemented employee benefit scheme by the company shall be in compliance with (Employee Stock Option Schemes and Employee Stock Purchase Schemes) Guidelines, 1999

36

Decision regarding issue of shares, forfeiture of the shares, alteration of shares,. cancellation of declared dividend, merger, amalgamation, de-merger, hiving off, voluntary delisting and other material decisions. Immediately disclose all material information simultaneously of to all the Stock Exchanges, where the Securities company are listed
40A Minimum Level of Public Shareholding

To comply with the requirements specified in Rule 19(2) and Rule 19A of the Securities Contracts (Regulation) Rules, 1957.

To raise the public shareholding to the required level, the company should adopt the following methods

(a) issuance of shares to public through prospectus or

(b) offer for sale of shares held by promoters to public through prospectus or

(c) sale of shares held by promoters through the secondary market.

(d) Institutional Placement Programme (IPP) in terms of Chapter VIIIA of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended; or

(e) Rights Issues to public shareholders, with promoter/ promoter group shareholders forgoing their entitlement to equity shares, whether present or future, that may arise from such issue; or

(f) Bonus Issues to public shareholders, with promoter/ promoter group shareholders forgoing their entitlement to equity shares, whether present or future, that may arise from such issue; or

(g) any other method as may be approved by SEBI, on a case to case basis.

40B

Compliance with Takeover Regulations, 2011

The company should comply with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, in case there is a take over offer made or there is a change in management control.

41

Preparation and submission of financial results

Company has to give notice of Board Meeting at least 7 clear calendar days prior to the meeting and also needs to issue a public notice in this regard.

Time – within 45 days from the end of each quarter(other than the last quarter)- to submit auditors report or unaudited results . In respect of last quarter the time limit is 15 min from completion of the board meeting.

43A

Filing of deviations in the use of public issue proceeds

Filing of deviations in the proceeds and use of public issue to appoint monitoring agency to monitor utilisation of proceeds etc.

47

Appointment of Company Secretary as Compliance Officer

Appoint a Company Secretary to act as compliance officer responsible for monitoring the Share Transfer process and report to the Company’s Board in each Meeting. Compliance officer will directly liase with the authorities such as SEBI, Stock Exchanges, ROC etc. and investors with respect to implementation of various clauses, rules, regulations and other directives of such authorities and investor service and compliances of related matter

47C

Registration of share Transfer

 (i) Obtain certificate from Company Secretary in Practice, on half yearly basis, that the securities lodged for transfer have been registered and dispatched within 30 days from the date of lodgment with the company within 15 days from the end of half year. (ii) Send a copy of the same within 24 hrs of the time of receipt to all listed exchanges. (iii) Intimate all the exchanges within 48 hrs from the time of receipt of information of loss of certificate/closure time of Board (Committee) meeting.

49 Corporate Governance Compliance Report on corporate governance indicating compliance with the following:

(a) Board of Directors and composition of Board

(b) Limit on number of Directorships

(c) Maximum tenure of Independent Directors

(d) Formal letter of appointment and performance evaluation of Independent Directors

(e) Separate meeting of Independent Directors.

(f) Non-executive director’s compensation and disclosures

(g) Code of conduct of Directors to be published on the website

(h) Whistle blower policy is mandatory

(i) Audit committee and its composition and frequency of its meeting

(j) Mandatory review of certain information by Audit Committee

(k) Nomination and Remuneration Committee

(l) Subsidiary Companies

(m) Risk Management

(n) Related Party Transactions

(o) Disclosures

(p) CEO/CFO Certification

(q) Report on Corporate Governance, Quarterly compliance report

(r) Compliance Certificate from Practicing Company Secretary or auditor of the company

Time- within 15 days from the end of the quarter

50

Accounting Standards

Company should comply with all the accounting standards issued by the Institute of Chartered Accountants of India.

52

Corporate Filing and Dissemination System (CFDS)

All the listed companies are required to file information with the stock exchange only through Corporate Filing and Dissemination System (CFDS) which is put in place jointly by BSE and NSE at the www.corpfiling.co.in. The compliance officer, appointed under Clause 47(a) and the company shall be responsible for ensuring the correctness, authenticity and comprehensiveness of the information, statements and reports filed under this clause and also for ensuring that such information is in conformity with the applicable laws and listing agreement. [Clause 52(1)(b)]

53

Agreements with Media Companies/Associates

To notify the stock exchange and disseminate through its own website information on disclosures immediately upon entering into agreements with media companies and/or their associates Shareholding (if any) of media companies/associates in issuer the company. Details of nominee of media companies on the Board, any management control or potential conflict of interest arising out of such agreement. Back to back treaties/ contracts/agreements/MoUs or similar instruments entered into by the issuer company with media companies and/or their associates for the purpose of advertising, publicity, etc.

54

Maintenance of functional website and upload of contents

To maintain a functional website containing basic information about the company.

To ensure that the contents of the website are updated at any given point of time.

55

Submission of Business Responsibility Report

The company must submit to the Stock Exchange, as part of their Annual Reports, Business Responsibility Reports, describing the initiatives taken by the company from an environmental, social and governance perspective, in the prescribed format suggested by SEBI.

Non Compliance

If a company fails to comply with the listing agreement then as a consequence, the stock exchange may delist its securities for non compliance under Section 21 of Securities Contracts (Regulation) Act, 1956. There could also be a temporary suspension of the securities of the company and penalties can also be imposed on the defaulting company.

Author: Mr. Shubham Borkar, Senior Associate – Litigation and Business Development at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at shubham@khuranaandkhurana.com.

Reference:

[1] Section 2(52) of Companies Act,2013

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