How a startup can list over stock exchange
Listing of shares on a stock exchange means, that company is bringing a proposal in front of the general public, so that they could invest in the company and become the shareholder of the company. This is also called Initial Public Offer i.e. when for the first time shares are being listed by the company in the stock exchange. The companies having a share capital, doing very well business, but the capital is being held by the selective persons only i.e. the promoters and relatives. So for the expansion of business and the introduction of more capital in the company for future projects or expansions, companies opt for this option.
When a company goes public they are actually selling ownership in their company. There is one simple reason why most private business owners decide to sell ownership in their company in order to trade on the stock market is to raise money.
Reasons why companies choose listing of securities
- Expansion of the business is the most prominent reason as well as the benefit of listing securities.
- Hire new talented individuals in the organization is also one of the benefits.
- Open more locations all over the country.
- Selling shares on a stock exchange helps to raise capital, plus it's a mark of prestige in the business world.
- The listing of securities gives the opportunity to the growing companies to work in a disciplined business environment, where SEBI keeps a check on all the activities of the organizations and forms rules and regulations for the same.
- Listing of securities helps the company in raising funds from the market.
What the general public sees in the company while investing in the IPO?
- Past history of the company
- Future prospects of the company
- Reasons why a company is bringing the IPO
- Who are the investors of the company
- Who are the promoters of the company
- What are the strengths of the company
- The profitability of the company
These things give an idea about the probability of the fruitfulness of the company then only the general public invests in the shares offered in IPO.
What are the perquisites for listing of securities for the first time on the stock exchange?
- It should be registered company under the Act.
- The company should have recognized as a startup under MSME and the Department of Industrial Policy and Promotion.
- A startup should have got angel investing for at least 2 years prior to the filling of application.
- The company should have a website containing all the details of the company and its promoters.
- After application in the startup sector of BSE, there is a restriction on the company that it cannot change its promoters for one year.
- Paid-up Share Capital:- The paid-up equity capital of the applicant shall not be less than 10 crores and the capitalization (product of the issue price and the post issue number of equity shares) of the applicant's equity shall not be less than 25 crores
- Comply with Conditions Precedent to Listing:
The Issuer shall have to followed the terms precedent to listing defined under different acts, rules and regulations framed.
- The company should be in survival for at least 3 years.
- The company has not been stated to the Board for Industrial and Financial Reconstruction (BIFR).
- The net worth should be positive
- The company has not acknowledged for winding up petition admitted by a court.
- There shall be no disciplinary action by other stock exchanges and supervisory authorities in past three years.
- There shall be no substantial regulatory or punitive action by a stock exchange or monitoring authority in the past 3 years against the applicant company.
Steps to be taken before making an application for listing
- Submission of Memorandum and Articles of Association: the Memorandum and the Articles of Association of the Issuer wanting to list its securities must contain provisions as given there.
- Approval of draft prospectus: This is the most important document is to be prepared while listing the securities.
- Submission of Application: Issuers desiring to list new securities on the NSE shall make an application for admission of their securities to dealings on the NSE in the forms.
- Clauses of Articles of Association.
- Application Letter for Listing.
- Listing Application providing pre-issue details of securities.
- Listing Application providing post-issue details of securities.
- List of supportive documents
- Schedule of Distribution
- Listing Agreement
- Security Deposit: This is to be payable only for new and fresh issues and only when NSE is the Regional Stock Exchange.
In case the company fulfills the criteria, send the following information for further processing to the stock exchange,
- A transitory note on the promoters and management.
- Company profile.
- Copies of the Annual Report for the last 3 years.
- Copies of the Draft Offer Document.
- Memorandum & Articles of Association.
After scrutinizing all the documents and demanding other documents as required by the department, the draft prospectus is being approved by the department and after this company is ready for the listing of the securities.
Listing of securities seems to be complicated but it is not, at least when we know its outcomes. The outcome of listing can be multi-folded than the efforts used in the listing process. So take steps towards the business growth from today with NeuSource.
For more information contact us on given communication details, Email Id Swati@neusourcestartup.com and Phone Number 9540026175.
The NeuSource Startup Mind is the finest business startup consultant that offers various services of registration like Proprietorship Firm Registration, Partnership Firm Registration, LLP Registration, Company registration, GST Registration, Copyright Registration, ISO Registration Trademark registration and other FSSAI License etc.
To start a new business is easy, but to make it successful is difficult . So For success, choose the best." Be compliant and proactive from the beginning and choose NEUSOURCE as your guidance partner.