The issue, allotment, and listing of shares are regulated under the Companies Act, 2013 and the Securities and Exchange Board of India (SEBI) regulations. The procedure for issue, allotment and listing of shares under Indian law revolves around ensuring a fair and transparent process for raising capital and enhancing investor confidence.
The Process of Issuing Shares
The procedure for issuing shares, which is primarily governed by Section 62 of the Companies Act, 2013, begins with a resolution in the company's board meeting. The resolution must be supported by at least two-thirds of the members. Upon passing the resolution, the company issues a prospectus detailing the offer, which should comply with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.
Allotment of Shares
The allotment of shares, as per Section 39 of the Companies Act, 2013, occurs after the minimum subscription has been received. The allotment procedure should not exceed two months from the closure of the issue. If the stipulated subscription isn't reached, the application money must be returned within a period not exceeding 15 days from the closure of the issue. The company must allot shares within 60 days of receiving the application money.
The Listing of Shares
The listing of shares on recognized stock exchanges is regulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A company must enter into a listing agreement with the stock exchange, and it must comply with the conditions of the stock exchange and applicable SEBI regulations. Post-listing, the company is obliged to adhere to continuous disclosure and compliance requirements to ensure transparency and protect investor interests.
Key Case Laws
Sahara India Real Estate Corporation Limited and others vs. SEBI: In this landmark case, the Supreme Court ruled that Sahara India Real Estate Corporation Limited had breached SEBI regulations by bypassing the requirement of issuing a prospectus and listing on a recognized stock exchange.
Akash Constructions Ltd. vs. SEBI: The Securities Appellate Tribunal upheld SEBI's order, stating that Akash Constructions Ltd had violated SEBI regulations by allotting shares beyond the prescribed period.
Conclusion: Issue, Allotment and Listing of Shares
The procedure for the issue, allotment, and listing of shares in India, as regulated by the Companies Act, 2013 and SEBI regulations, promotes fair market practices and aims to protect the interest of the investors. Understanding these procedures can help companies effectively navigate the capital market and comply with statutory requirements.
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