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CS Executive · Capital Market and Securities Laws · Listing Obligations and Disclosure Requirements

Reliant Textiles Ltd, a company whose equity shares are listed on a recognised stock exchange, wants to know the legal basis on which it must follow the conditions in its listing agreement, including governance conditions such as board composition. Under the Securities Contracts (Regulation) Act, 1956, what is the position?

Section 21 of the SCRA, 1956 says that a person whose securities are listed must comply with the conditions of the listing agreement with the stock exchange. Governance requirements on board and committees form part of those conditions, so compliance is mandatory and not merely advisory.

  1. ASection 21 requires a person whose securities are listed to comply with the conditions of the listing agreement with that stock exchangeCorrect
  2. BListing agreement conditions are only advisory unless the company's articles adopt them
  3. COnly the stock exchange can enforce them, and the SCRA has no provision on compliance
  4. DCompliance is required only for the first three years after listing

Explanation

Section 21 of the SCRA provides that where securities are listed on the application of any person, that person shall comply with the conditions of the listing agreement with the exchange. Governance conditions are part of those conditions. The view that they are advisory is wrong because the Act makes compliance mandatory.

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