Step-by-Step Legal Process to Create a Profitable Company, Get Listed on the Stock Market, and Exit Successfully

Building a company from scratch, making it profitable, getting it listed on the stock market, and finally planning a successful exit is a journey that requires strategic planning, legal compliance, and financial acumen. In this guide, we will walk you through the entire legal process, from incorporation to listing on the stock exchange and executing a profitable exit strategy.

Step 1: Choose the Right Business Structure

Before you start a company, selecting the appropriate legal structure is crucial. The most common business structures include:

• Private Limited Company (Most Preferred for Growth and Listing)
• Limited Liability Partnership (LLP) (Not Preferred for Stock Market Listing)
• One-Person Company (OPC) (Limited Growth Potential, Not Suitable for Listing)

For stock market listing, a Private Limited Company is the best option, as it allows for scalability and easier conversion into a Public Limited Company later.

Legal Steps for Company Incorporation in India

1. Register a Private Limited Company
   • Apply for Director Identification Number (DIN)
   • Obtain Digital Signature Certificate (DSC)
   • Reserve the company name through SPICe+ (MCA Portal)
   • File for incorporation with Memorandum of Association (MoA) and Articles of Association (AoA)
2. Obtain Required Licenses & Registrations
   • GST Registration (if turnover exceeds the prescribed limit)
   • Professional Tax Registration (if applicable)
   • Shop & Establishment Act Registration (if required)
3. Open a Business Bank Account
   • Once you receive the Certificate of Incorporation (COI), open a current account in the company’s name.

Step 2: Build a Profitable & Scalable Business Model

After legal incorporation, focus on profitability and scalability:

• Develop a strong product/service
• Create a revenue model that ensures steady cash flow
• Maintain compliance with tax laws & regulations
• Ensure proper bookkeeping & accounting from the start

Financial & Compliance Checkpoints

• Appoint a Chartered Accountant (CA) for tax filings and audits
• File Annual Returns with MCA (Form AOC-4 & MGT-7)
• Income Tax Returns (ITR) for the company & directors

Step 3: Convert the Private Limited Company into a Public Limited Company

To list on the stock market, your company must be converted into a Public Limited Company.

Legal Process:

1. Board Resolution – Approve conversion from Pvt. Ltd. to Ltd.
2. Alter the Memorandum (MoA) and Articles of Association (AoA)
3. Apply to the Ministry of Corporate Affairs (MCA) for conversion
4. Increase Paid-Up Capital (Minimum ₹5 Crore is required for SME IPO)

Step 4: Get Listed on the Stock Market (IPO Process)

A company can get listed on NSE (National Stock Exchange) or BSE (Bombay Stock Exchange) through an Initial Public Offering (IPO).

IPO Eligibility Requirements (SEBI Guidelines)

• Minimum Net Tangible Assets of ₹3 Crore
• Minimum Average Net Profit of ₹15 Crore for 3 years
• Minimum Paid-Up Capital of ₹5 Crore
• Minimum Public Shareholding of 25%

Step-by-Step IPO Process

1. Appoint Investment Bankers & Legal Advisors
2. Conduct Financial Audits & Due Diligence
3. Draft & File Draft Red Herring Prospectus (DRHP) with SEBI
4. Receive SEBI Approval & Set IPO Price Range
5. List the Company on NSE/BSE and Issue Shares to the Public

Step 5: Plan a Profitable Exit Strategy

Once the company is listed, you have multiple exit options:

1. Promoter Sell-Off (Partial or Complete Exit)

• Sell a portion or majority of shares to institutional investors.
• Maintain board control or exit entirely.

2. Acquisition by a Larger Company

• A big company may acquire your business, offering a profitable exit.
• You can negotiate cash or stock-based acquisition deals.

3. Mergers & Acquisitions (M&A)

• Merge with another company for increased valuation and cashing out shares.

4. Secondary Market Exit (Stock Sale by Promoters)

• Sell promoter shares in small portions over time to institutional or retail investors.

Final Thoughts

Creating a company, making it profitable, listing it on the stock market, and executing a successful exit strategy is a complex but highly rewarding process. It requires legal compliance, financial discipline, and strategic decision-making.

If you are planning to take your startup on this journey, consider seeking startup consultancy services and expert guidance to navigate each stage efficiently.

Are you looking for expert assistance in business registration, compliance, and stock market listing? Contact Expenect today for professional consulting services!