The prospectus issued at the time of a public issue of shares or debentures must mention the names of the stock exchanges where application for listing of such securities has been made. If a company fails to obtain listing permission from all the stock exchanges where the shares are proposed to be listed, the allotment made in pursuance of such a prospectus is void.

In view of the amendment made to Section 73 in 1974, which was intended to nullify the effect of the Supreme Court's judgement to the contrary in Union of India vs Allied International Products Limited, AIR 1971 SC 251, it is now necessary for a company to obtain permission for listing from all the stock exchanges to which application for listing was made. Even if one stock exchange refuses permission forlisting, the allotment would be void.

Moreover, in case of refusal of permission by a stock exchange for the listing, the company is required to forthwith repay all monies received from applicants in pursuance of such a prospectus within eight days, failing which the company and every director of the company who is an officer in default shall be liable to repay that money with prescribed interest, which is 15 per cent at present.

The object underlying the listing of securities on a stock exchange is to make them marketable. Listing facilitates liquidity and easy transferability of securities. It provides a platform in the form a stock exchange where a large number of investors come together through brokers for purchase and sale of securities. In the absence of listing, an investor may find it extremely difficult to sell or purchase securities held by him. Several other advantages come from the listing of securities due to the listing agreement between the company and a stock exchange.

For example,every company listed on the Bombay Stock Exchange (BSE) is now required to furnish its unaudited quarterly financial results for the benefit of the investors, including details such as its turnover, gross profit, net profit, tax liabilities, etc. It is required to inform the stock exchange about the dates of important meetings of its board of directors where price-sensitive matters are to be considered. Information about important events such as lockouts, strikes or closure of its unit on any other account have to be intimated to the stock exchange.

Changes in character or nature of its business, in the board of directors, of managing director or of auditors of the company are required to promptly notified to the stock exchange. The closure of transfer books of the company and the fixation of record date for the purposes of declaration of dividend or issue of rights or bonus shares are required to be notified to the stock exchange in advance.

The company is required to deliver certificates lodged fortransfer, sub-division, consolidation, renewal, etc, within one month of the date of submission. It should also submit distribution schedule of its securities annually. Recommendations of dividends, cash bonuses and proposals for bonus shares, rights shares etc, made at the company's board meeting are required to be notified to the stock exchange promptly.

The letters of allotment and of rights are required to be issued simultaneously to all shareholders so that nobody has undue advantage over others. There are provisions for protecting the interest of common investors in the event of a proposed take over of the company. This list is only illustrative and there are several other advantages flowing out the listing agreement. The listing also enables the company to get the status of a widely held company with consequent advantages.

Such being the importance of listing, particularly for investors, it is of utmost necessity for the benefit of investors to ensure that once listed, the securities of a companymust continue to be listed till it dies its natural death by way of one or other legal mechanisms such as winding up or merger. However, there are several instances when securities of a listed company are delisted by a stock exchange. For example, at present there are about 580 companies (around 10 per cent of the 5,850 or so companies currently listed on BSE) whose securities have been delisted by the BSE.

Many such companies continue to be in the delisted state for as many as four years. In about 90 per cent of the cases of delisting on the BSE, the reason for delisting is non-payment of annual listing fees. Other reasons include merger, amalgamation, winding up of the company. While many companies are alert and sensitive to the threat of delisting, there are several others which are immune to this threat, particularly loss-making companies or companies whose shares are traded at much below the par value.

While the company and the stock exchange do get affected due to the delisting, the biggest loser ofdelisting is the investor in as much as he loses the advantage of trading on the stock exchange, thereby making his investment illiquid since he would not be in a position to dispose of his securities. And, in several cases, delisting continues for several years without any respite for the investor. Added to this is the rising number of delisted companies day by day, thereby further aggravating the investor's problems.

Experience shows that delisting of securities fails to bring about any improvement in the compliance of the provisions embodied in the listing agreement, for the violation of which the securities are delisted. On the contrary, it leads to immense disadvantage and inconvenience to investors. Accordingly, there is an urgent need to consider suitable amendments to the relevant laws and rules to improve this situation. Following suggestions are made in this respect: