Tehran Stock Exchange : The Regulations on Securities Listing

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Tehran Stock Exchange
The Regulations on Securities Listing

In applying the provisions of article 30 of the Securities Market Act of the Islamic Republic of Iran
enacted by the Parliament (Islamic Consultative Assembly) in November 2005 and in view of
article 16 of the Executive Bylaw thereof approved on June 24, 2007 by the Council of Ministers,
the existing rules comprising 61 articles, 20 notes and 5 appendices, were proposed by the Tehran
Stock Exchange and approved by the board of directors of the Securities and Exchange
Organization on Dec. 22, 2007 and would take effect one month after the date of approval.

Chapter One- General
Section one: Definitions

Article 1- The terms defined in article 1 of the Securities Market Act and in the Statute of the Stock
Exchange have also been used herein with the same meanings. Other terms are defined as
follows:
1. Listing means adaptation of securities condition and its issuer to the provisions set out in
these rules to provide the possibility of trading in securities on the Stock Exchange.
2. Applicant means a legal entity that submits an application for listing of its securities on the
Stock Exchange.
3. Stock Exchange Official List means an official document which is drawn up by the Stock
Exchange to establish tradable securities, traded securities and their prices separately in
the primary and secondary markets so as to be notified to the general public.
4. Suspension of Listing means temporary halt of trading in securities entered in the Stock
Exchange official list arising out of the violation of the provisions herein.
5. Cancellation of Listing means the absolute delisting of the securities from the Stock
Exchange official list.
6. Listing Board means a board which is formed as described in article 2 of the existing rules.
7. Listing Advisor means a person who acts as a major intermediary between the applicant
and Stock Exchange, and is represented by the applicant to perform all or a part of its
functions as regards the listing procedures on the Stock Exchange.
8. Prospectus: means a series of information that the Exchange shall have to disseminate on
its website for the general public when securities are posted in the Stock Exchange official
list. The sample format of this report shall be approved by the Stock Exchange Board of
Directors.

Section two: Listing Board

Article 2- The Listing Board is composed of 5 members and a secretary as follows:
1. The Organization’s chairman of the board of directors or a board member represented by
him;
2. The Stock Exchange chairman of the board of directors or a board member represented
by him;
3. An expert in accounting, auditing or finance being familiar with industry as proposed by
the Board of Directors of the Association for Brokers and approved by the Organization
Board of Directors;
4. An expert in accounting, auditing or finance being familiar with industry as appointed by
the Organization board of directors;
5. An expert in accounting, auditing or finance being familiar with industry as appointed by
the Stock Exchange board of directors;
6. Stock Exchange managing director acting as secretary of the Listing Board without the
right of vote or one of the Stock Exchange officers represented by him;
Note (1): The Organization’s chairman of the board of directors or his representative shall act
as chairman of the listing board.
Note (2): The office term of the persons referred to in paragraphs 3 to 5 of this article shall be
two years for each term and their reappointment shall meet no impediment for a maximum of
3 consecutive terms.

Note (3): The persons referred to in paragraphs 4 and 5 of this article, may at the discretion of
the appointing authority and the person referred to in paragraph 3 of this article, may at the
discretion of the proposing authority or the Organization, be changed before termination of
their office-terms in compliance with the formalities described in paragraph 3 of this article.
Note (4): The Listing Board, where necessary, is entitled to invite other experts as well as
representatives of the applicant companies for listing to attend the meetings without having
the right to vote.

Article 3- The meetings of the listing board are held when a minimum of three members, with the
inclusion of the Organization chairman or his representative as a member, are present. Resolutions
shall be valid when they are taken by the concurrent votes of at least three members, whereby
one of them shall be the Organization chairman or his representative.

Chapter Two- Securities Listing Requirements
Section one: Markets

Article 4- The Tehran Stock Exchange (TSE) consists of the primary market and the secondary
market. The primary market is composed of two main and secondary boards. The ordinary shares
(common stocks) are listed on the Stock Exchange merely in one of the primary market or
secondary market boards. Where the applicant has satisfied the general conditions for listing
ordinary shares, it shall have to submit its application to the Stock Exchange for the main board or
secondary board in the primary market or in the secondary market with respect to the specific
shares listing requirements for each of the two markets.

Section two: The Listing of Ordinary Shares (Common Stocks)
A- General Conditions

Article 5- The ordinary shares shall fulfill the following conditions for listing in each of the markets
herein:
1. Shares should have been registered with the Organization.
Note: Non-registration of ordinary shares with the Organization shall not prevent these
shares from being admitted by the Stock Exchange. However, such shares may not be
entered in the Exchange official list prior to their registration with the Organization.
2. There shall exist no effective lawful restriction for transfer of shares or exercise of voting right
by shareholders.
3. Shares should be registered ones with voting right.
4. The entire face value of shares should have been paid.
B- Specific requirements for ordinary shares listing in the main board of the primary market
Article 6- The applicant for listing ordinary shares in the main board of the primary market shall
meet the following conditions:
1. The company should be a public-joint stock entity with the registered capital of at least
two hundred billion Rials.
2. All of the company capital should have been divided into ordinary shares without granting
any special privilege to some shareholders.
Note: The shares of companies whose portion of their shares enjoys specific conditions may
be admitted upon approval of the Listing Board pursuant to related procedures.
3. At least 20 percent of the company’s registered shares should be floating with a minimum
number of 1000 shareholders.
Note: Any of the following instances which totally equal or exceed 5 percent of an entity’s
total shares, shall not be considered floating shares.
A- Shares retained by each one of the shareholders;
B- Shares owned by family shareholders (blood relatives of the first and second
categories);
C- Shares owned by co-group juridical persons with direct or indirect ownership;
4. The company should have the minimum three years of track record in the related industry
during which the area of activities has not been changed. Accordingly, at least six months
should have passed from the date of the office-term of at least two of the company’s
present directors.
Note: The Listing Board is entitled to accept the previous track records of the applicants
that have been formed as a result of mergers or restructuring provided that such activities
are consistent with their current activities. However, the applicant should at least have one
year of business record in its current structure.
5. The company should have been profitable for the three consecutive fiscal years ending its
listing with a minimum of two full financial periods. There should also be a bright
perspective of the company’s sustainable profitability and operations in the related industry.
6. The company should not have any retained losses.
7. The shareholders’ equity to total assets ratio should be thirty percent (30%) on the basis of
the last audited annual financial statements. As to the applicants that are subject to article
8 of these rules, such ratio is determined in accordance with the standards governing the
applicant’s status.
8. The applicant’s articles of association should have been drafted in accordance with the
sample constitution approved by the Organization board of directors as well as the
requirements and terms prescribed by the Organization and other authorities of
competent jurisdiction.
9. The company’s operating profit during the two fiscal years ending its listing should be of
high quality and the total net cash flows from its operating activities should be positive
during the given periods.
10. The auditor’s report on the financial statements for the two fiscal periods ending the listing
should not reflect any rejection or absence of comment. In the event that the auditor
makes a conditional statement, he should exclude the items concerning the conditions
arising from non-performance of substantial adjustments in the applicant’s revenues,
expenses, profits, losses, liabilities and obligations.
11. There should not exist any legal actions for or against the company, having material effect
on the financial statements.
12. The company, as confirmed by the auditor, should have an accounting information system
(including financial accounting and cost accounting) which is appropriate to its operations
and suited to the requirements for seeking Exchange listing (including ability to gather and
disclose timely and reliable financial information).

Article 7- The board members, the managing director and directors of the applicant should not
have any records of absolute criminal conviction or material offences pursuant to the rules and
regulations governing the securities market or of any professional misconduct.

Article 8- Where the establishment and operation of the applicant are subject to compliance with
specific rules and standards or obtaining legal permits, the applicant shall have to abide by such
rules and regulations in addition to adherence to the provisions herein.

Article 9- Any type of transfer, excluding involuntary transfer, with regard to more than 50 percent
of shares belonging to major shareholders before the end of the second year of listing, shall be
subject to the written statement by the Stock Exchange and approval of the Listing Board.
C- Specific requirements for ordinary shares listing in the secondary board of the primary market
Article 10- The applicant seeking ordinary shares listing in the secondary board of the primary
market, shall adhere to the specific conditions set forth in the main board of the primary market
and provisions herein except for the following circumstances:
1. The company should be a public-joint stock entity with the registered capital of at least
one hundred billion Rials.
2. The percentage of floating shares and the number of shareholders should not be lower
than 15 percent of the registered capital and 750 individuals respectively.
3. The shareholders’ equity to the total assets ratio should at least be twenty percent (20%) on
the basis of the last audited annual financial statements.
4. The company should have been profitable during the two fiscal years ending its listing and
further have a bright perspective of the company’s sustainable profitability and operations
in the related industry.
D- Specific requirements for ordinary shares listing in the secondary market
Article 11- The applicant seeking ordinary shares listing in the secondary market shall adhere to
the specific conditions set forth in the main board of the primary market and provisions herein
except for the following circumstances:
1. The company should be a public-joint stock entity with the registered capital of at least
thirty billion Rials.
2. The percentage of floating shares and the number of shareholders should not be lower
than 10 percent of the registered capital and 250 individuals respectively.
3. The shareholders’ equity to the total assets ratio should at least be 15 percent on the basis
of the last audited annual financial statements.
4. The company should have been profitable during the one fiscal year ending its listing and
further have a bright perspective of the company’s sustainable profitability and operations
in the related industry.
5. There should at least be one market maker.
Note: The maximum period of securities trading in this market after listing shall be three
years for the companies with over one hundred billion Rials of capital sum.
G- Requirements for transfer of listed shares between markets and boards
Article 12- Based on the information available at the end of Esfand (the Iranian calendar ending
March 20) of each year, the Stock Exchange shall have to transfer the companies listed in the
secondary board of primary market to the main board of primary market upon approval of the
Listing Board until the end of Ordibehesht (the Iranian calendar ending May 21) of the following
year at the latest if the conditions for the main board of primary market as well as the terms set
forth hereunder have been met:
1. The passage of minimum one year from the date of listing them in the secondary board of
primary market.
2. The minimum trading days of the company should not be less than 35 percent of the total
trading days in a year and, further, without taking account of the bulk deals at least 4.5
percent of the company’s registered shares should have been traded during the given
period.

Article 13- Based on the information available at the end of Esfand (the Iranian calendar, ending
March 20) of each year, the Stock Exchange shall have to transfer the companies listed in the
secondary market to the secondary board of primary market upon approval of the Listing Board
until the end of Ordibehesht (the Iranian calendar ending May 21) of the following year at the
latest if the conditions for the secondary board of primary market as well as the terms set forth
hereunder have been met:
1. The passage of minimum one year from the date of listing them in the secondary market.
2. The minimum trading days of the company should not be less than 35 percent of the total
trading days in a year and, further, without computing the bulk deals at least 3 percent of
the company’s registered shares should have been traded during the given period.

Article 14- Based on the information available at the end of Esfand (the Iranian calendar, March
20) of each year, the Stock Exchange shall have to transfer the companies listed in the main
board of primary market, failing to have met the conditions laid down for this board, to the
secondary board of primary market upon approval of the Listing Board until the end of
Ordibehesht (the Iranian calendar, May 21) of the following year at the latest.
Article 15- Based on the information available at the end of Esfand (the Iranian calendar, March
20) of each year, the Stock Exchange shall have to transfer the companies listed in the secondary
board of primary market, failing to have met the conditions laid down for this board, to the
secondary market upon approval of the Listing Board until the end of Ordibehesht (the Iranian
calendar, May 21) of the following year at the latest.
Section three: Participation Certificates Listing
Article 16- The following musharaka sukuk shall be qualified for listing when they meet the required
conditions:
1. The musharaka sukuk issued by the government, state corporations, (under article 3 of the
Law on the Method of Issuing Participation Certificates as specified in the annual budget
figures), Central Bank (CBI) and Municipalities.
2. The musharaka sukuk issued by the companies registered with the Organization.
Article 17- The musharaka sukuk listed on the Stock Exchange should be registered and have an
appropriate credit rating as assigned by the Listing Board. In order to judge the appropriateness
of the credit rating of the listing applicant’s Participation Certificates, the Listing Board may take
into account the services rendered by the respective financial institutions which have obtained
their permits from the Organization.
Note: The Participation Certificates issued by the Ministries and governmental Organizations
as well as the Central Bank of the Islamic Republic of Iran shall need no credit rating for
listing on the Stock Exchange.

Article 18- The nominal value of the Participation Certificates of the listing applicant shall not be
less than 100 billion Rials per issue.

Article 19- The interval between the listing until the maturity of Participation Certificates should at
least be two years.
Note: The interval concerning the subject of the note under article 17 may be curtailed to 6
months at the discretion of the Listing Board.

Article 20- The market and trading board of the listed Participation Certificates are determined on
the basis of their credit ratings by the Listing Board. The Stock Exchange may allocate an
independent market or board to the listed debt securities trades, inter alia, musharaka sukuk.

Article 21- The second-hand transactions of the listed Participation Certificates shall be exclusively
carried out on the Stock Exchange. The Listing Board shall have to ensure that this provision is
fulfilled when the Participation Certificates are admitted.

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