For any commercial outfit seeking to raise funds from the public, knowledge of SEBI’s listing criteria acquires significance. As a key controller of the Indian securities market, SEBI supervises and administers the market and formulates investment policies. Regulatory adherence in tandem with SEBI guidelines helps enterprises avoid penalties, delays, anomalies, or non-acceptance by bourses.
Every exchange-listed company must follow SEBI regulations. Moreover, if any of SEBI’s clauses or mandated guidelines are enforced on an entity, such enterprises must comply with SEBI’s provisions, irrespective of whether they are exchange-listed.
Prescribed Norms of SEBI’s Listing of Shares
SEBI (Securities and Exchange Board of India) gave orders known as the Listing Obligations and Disclosure Requirements (LODR) that defined the extent of disclosures and the level of transparency that companies should have to meet these norms. The protection of investors and stakeholders is the major goal of this compliance system. It also streamlines disclosures in many industries. Introduced in September 2015, the LODR guidelines have played a key role in cultivating trust in India’s financial and securities markets.
These listing regulations align the listing requirements and market disclosure norms of listed companies with the international benchmarks.
The rules of LODR integrate:
- Requirements related to the Listing Agreement
- SEBI regulations on market and corporate disclosures and accountability.
- Principles of corporate governance for listed companies.
- Distinct requirements for separate financial properties or categories of securities.
- Inaugural issuance of shares and post-IPO share norms
- Organizational engagement, endeavours for fundraising and events
- Scheduling timelines to divulge material events or price-sensitive details to bourses
- Including SMEs within the ambit of the rules
The LODR framework banks on the Companies Act of 2013. It also gathers compliance methods from international regulatory systems, such as the United States Sarbanes-Oxley Act (SOX).
Essentials for Listing Shares Under SEBI Guidelines and Market Regulations
The SEBI (Listing Obligations and Disclosure Requirements) Rules, 2015, contain a set of principles and guidelines issued by SEBI to regulate and control disclosure practices and the commitments that every publicly listed company must comply with. These legally binding rules ensure that listed entities follow effective governance practices, supply timely and reliable information to stakeholders and investors, and standardize requirements across the diverse categories of exchange-listed securities.
The SEBI Guidelines cater to the following aspects:
- Cohesion of rules: The rules strengthen and expedite the listing agreements to encompass the diverse sectors of the capital market, containing debt, equity, and different securities into a unified document to facilitate understanding and ready reference.
- Corporate supervision and governance: They establish and articulate the standard principles of corporate governance, and supervise that publicly traded companies adhere to the essential norms and elementary compliance requirements.
- Imposed Disclosures: Corporations are bound to divulge crucial data to the public and shareholders in a timely, transparent, and accountable way.
- Web-based Information Delivery and Hosting: Listed companies must make available on their portal the disclosures for at least 5 years.
- The company is to identify their Material subsidiary: Regulation 16(1)(c) of the SEBI (LODR) outlines the procedure through which the Company will find out its material subsidiary and also places specific corporate governance protocols which need to be pursued by the Company regarding the operation and control of its material subsidiary. Every event and information concerning the material subsidiary must be divulged by companies that can have a bearing on the listed entity.
- Align with the Stock Exchange rules: Listed entities must provide timely and proper responses to all queries posed by the Stock Exchange.
SEBI guidelines to list shares cover IPO rules, initial eligibility, and the duties of public companies after going public. Key rules necessitate companies to meet set financial standards, like market size and paid-up capital. Besides, it includes deploying a governance architecture that fulfils statutory obligations and maintains accountability for disclosures related to financial performance, corporate actions, material events, and equity distribution.
Preliminary Listing Conditions and Public Offering
- Financial Metrics: Companies need to tick all the boxes regarding the minimum paid-up capital and market capitalization requirements. Certain exchanges need positive EBITDA or income and earnings covering a specific period.
- Going Public: At least 25% of the equity shares must be publicly traded and allotted to them during the Initial Public Offering (IPO).
- Process for IPO: Shares must be offered to the public for the first time within 12 months of SEBI’s feedback and approval, and the offer must remain open for no more than 10 working days.
- System of Application: Approval of bids is handled through an application that leverages the Applications Supported by Blocked Amount (ASBA) mechanism.
- SEBI Observation: Companies must submit a draft prospectus to SEBI for review during the 21-day pre-filing period before filing it with the Registrar of Companies (ROC).
Framework For Corporate Governance
SEBI’s LODR approval establishes stringent standards to enhance policies and enable decision-making on corporate governance. These contain:
- Board make-up and Diversity: Listed companies must retain a minimum proportion of independent directors to certify that policy-making is based on objectivity and sound executive reasoning. SEBI urges a board to have at least one female director to promote gender sensitivity and diversity.
- Payment System: It is obligatory for the organization to disclose the information regarding the setup of the CEO, the director, and the executive top management’s pay packages. This includes showing how CEO pay compares to that of others in the organisation.
Risk Mitigation Framework and Internal Controls: Listed companies are required to have a risk management system and internal control setup. These systems need to tackle financial risks and fix operational inefficiencies in a practical way.
Fiscal Transparency and Reporting Duties
One of the guiding principles of the SEBI LODR directives is to guarantee prompt, accurate, and expeditious financial reporting. Towards this effort, the listed entities have to conform to the following rules:
- Disclosing Quarterly financial performance, which comprises income statements, estimates of profit and loss, and balance sheet reports and must be published both on the company’s portal and the stock exchanges.
- Annual Financial Reports containing the Financial Statement, along with a segment on Management Discussion and Analysis (MD&A) detailing business update and progress report, the likely pitfalls, and future projections.
- Audit Reports of the financial statements of a listed company by an independent, third-party auditor. The audit reports need to be handed over alongside the economic performance. Audited Yearly financial results must be filed within a time span of 60 days of the culmination of the financial year.
- Periodic Reports: A report on corporate governance must be submitted within a fortnight of the end of each quarter. A certificate from a Company Secretary in practice is required every half-year.
Declaration of Material Events and Particulars
SEBI LODR authorizes the disclosure of any material event or particulars influencing the decision-making of investors by the listed companies. Such events may encompass:
- Mergers and Acquisitions (M&A)
- Related Party Transactions (RPTs)
- Alterations in capital structure, like share capital, debt or issuance of securities
- Legal proceedings that have an impact on the company’s financial health need to be communicated without delay.
Conclusion
Any enterprise initiating a public fundraising round requires knowledge of the listing criteria set by SEBI. These regulations certify that firms uphold the governance guidelines before and after their initial public offering. An integrity-driven trading compliance helps companies avoid delays, circumvent penalties, and address discrepancies or non-acceptance by stock exchanges. With structured, methodical, and preemptive planning, organizations can transform bottlenecks and regulatory barriers into a trump card, build investor confidence and achieve high levels of governance and growth.
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