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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