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THE ROLE OF STOCK EXCHANGE IN CORPORATE GOVERNANCEBy
Saurabh Nehete
Vivek TV
Sagar Edke
Harsh Bakore
Ashish Barapatre
CORPORATE GOVERNANCE Corporate governance, in plain terms, refers to the rules, processes,
or laws by which businesses are operated, regulated, and controlled.
In recent times, corporate governance has received increased
attention because of high-profile scandals involving abuse of
corporate power and, in some cases, alleged criminal activity
by corporate officers.
An integral part of an effective corporate governance regime
includes provisions for civil or criminal prosecution of
individuals who conduct unethical or illegal acts in the name of
the enterprise.
OBJECTIVE OF CORPORATE GOVERNANCE Objective of corporate governance is maximization of
shareholders wealth
The rules, process or laws by which business are
operated, regulated and controlled
Internal factors defined by the officers, stockholders or
constitution as well as external forces such as consumer
groups, clients and government regulations
STOCK EXCHANGE
Section 2(j) Securities Contract (Regulation) Act,1956, “stock exchange” means—
(a) any body of individuals, whether incorporated or not, constituted before corporatization and demutualization under sections 4A and 4B, or
(b) a body corporate incorporated under the Companies Act, 1956 (1 of 1956)
whether under a scheme of corporatization and demutualization or
Otherwise, for the purpose of assisting, regulating or controlling the business of buying,
Selling or dealing in securities.
OBJECTIVE OF STOCK EXCHANGE
Platform to the companies for raising additional funds.
Trading floor.
Trading using Network.
The purpose of a stock market is to facilitate the
exchange of securities between buyers and sellers,
reducing the risks of investing.
ROLE OF STOCK EXCHANGE Helps to increase goodwill of company.
New market for securities.
Ready market for the purchase and rate of securities.
Helps to gain confidence among investors.
Get information to corporate sector regarding trends of
investment, investors, choice and priorities.
Helps in creating the habit of savings.
Invest their savings in corporate and government securities.
CORPORATIZATION AND DEMUTUALIZATION OF STOCK EXCHANGES
Demutualization means restructuring the stock exchange and changing it
from a nonprofit organization mutually owned organization by its
members into a profitable company owned by various entities including
the public.
Corporatization means stock exchange should be organized as a company.
DEMUTUALISATION National Stock Exchange (NSE)
Over the Counter Exchange of India (OTCEI)
LISTING
Right of appeal against refusal of stock exchanges to list
securities of public companies.
Applications in Respect of New Issues or Offers for Sale or
Book-Building
DELISTING
Stock exchange can delist companies for a number of
reasons including :-
• Merger with another company
• Solvency problems
• Name change company asked to be removed
• Failure to comply with exchange rules
POWERS OF SEBI For the discharge of its functions efficiently, SEBI has been vested with the
following powers:
To approve by−laws of stock exchange .sebi
To require the stock exchange to amend their by−laws.
Inspect the books of accounts and call for periodical returns from recognized
stock exchanges.
Inspect the books of accounts of a financial intermediaries.
Compel certain companies to list their shares in one or more stock exchanges.
Registration brokers.
Primary Market
Opportunity to issuers of securities; Government as well as corporates
At Face Value, Discount or Premium value
Secondary Market
Traded after being initially offered to the public in the primary market
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