## Securities to be Dealt with in Stock Exchanges [Section 40]

Before making any public offer, every company must:

1. Make an application to one or more Recognised Stock Exchanges (RSE), and

2. Obtain permission from all such RSE (where it has applied) for its securities to be dealt with on them.

3. The prospectus must state the names of the RSE where the securities will be dealt.

> If permission is not obtained, any allotment becomes void and the company must refund moneys (see Section 39 framework).

### Punishment for default

Company: Fine ₹5,00,000 to ₹50,00,000.
Officer in default: Fine ₹50,000 to ₹3,00,000.

Worked example

### Example 1

Q. M Ltd. applies for listing of its IPO shares to BSE only, gets permission, and lists. But the prospectus had stated that the shares would also be listed on NSE, for which application was made but permission denied. Consequence?

A. Section 40 requires permission from all the RSE to which application is made and which are named in the prospectus. Failure attracts (i) refund of moneys to applicants and void allotment, (ii) fine on M Ltd. of ₹5 lakh to ₹50 lakh, and (iii) fine on officers in default of ₹50,000 to ₹3 lakh.

⚠️ Common exam mistakes

Thinking it is enough to get permission from one RSE — permission is required from each RSE to which application has been made and which is named in the prospectus.
Forgetting to name the RSE in the prospectus.

Bare-Act text Section 40 · Companies Act, 2013 · click to expand

Every company making public offer shall, before making such offer, make an application to one or more recognised stock exchange or exchanges and obtain permission for the securities to be dealt with in such stock exchange or exchanges.

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