The reason for the requirement by the Australian Stock Exchange (ASX)for a minimum of 500 shareholders in a new listed company is:
A)to ensure that administration costs per shareholder are kept to a minimum.
B)to ensure that there will be an active market in the company's shares.
C)to convince the ASX of the issuing company's credit-worthiness.
D)to assist in the raising of new capital.

Question

Quizplus · Accepted Answer

The requirement for a minimum of 500 shareholders helps to ensure that there will be an active market in the company's shares. This is because a large number of shareholders create more demand for the shares, leading to higher liquidity and more trading activity.

Answer A, C, and D are not the best choices. While they may all have some impact on the decision to require a minimum of 500 shareholders, they do not address the primary reason for the requirement, which is to create an active market in the company's shares.

The Reason for the Requirement by the Australian Stock Exchange