Delisting of shares refers to the removal of a listed security from a stock exchange. This action can occur for various reasons, but the outcome remains the same: the stock is no longer available for trading on that specific exchange.
Contents:
- What Is Delisting Of Shares?
- Voluntary Delisting Of Shares
- Reasons For Delisting Of Shares
- Types Of Delisting
- How To Sell Delisted Shares?
- Delisting Regulations
- What Is Delisting Of Shares – Quick Summary
- Delisting Of Shares- FAQs
What Is Delisting Of Shares?
Delisting of shares is the process by which a listed company’s shares are removed from the stock exchange. This implies that the public can no longer buy or sell the shares of the delisted company on that exchange.
Voluntary Delisting Of Shares
Voluntary delisting of shares occurs when a company removes its shares from a stock exchange. This might happen for various reasons, such as a company going private, merger or acquisition, or cost-saving efforts.
A recent example of voluntary delisting in the Indian market is Essar Oil. In 2017, Essar Oil decided to go private, leading to the delisting of its shares from both BSE and NSE.
Reasons For Delisting Of Shares
Delisting of shares can occur for several reasons, the primary one being non-compliance with the exchange’s regulations. A company’s inability to meet the financial or regulatory requirements of the exchange often leads to its shares being delisted.
• Non-compliance with listing agreements.
• Not able to maintain minimum public shareholding as per SEBI regulations.
• The company is going bankrupt or insolvent.
• Merger or acquisition, leading to company restructuring.
• Voluntary delisting by the company.
For instance, in 2018, the shares of Amtek Auto were delisted from the exchanges due to the company’s inability to meet the exchange’s regulations and financial insolvency.
Types Of Delisting
In essence, there are two types of delisting:
- Voluntary Delisting: When a company decides on its own to remove its shares from a stock exchange.
- Compulsory Delisting: When the stock exchange removes the shares of a company due to non-compliance with the listing agreement.
Examples of both these types are abundant in the Indian stock market. As mentioned earlier, Essar Oil is an example of voluntary delisting, while Amtek Auto exemplifies compulsory delisting.
How To Sell Delisted Shares?
Selling delisted shares is not as straightforward as selling listed ones.
Here’s a step-by-step guide on how to sell delisted shares:
- Get in touch with the broker and request an off-market sale of your delisted shares.
- Broker will provide you with a delivery instruction slip (DIS) or an off-market transfer form.
- Fill the DIS with details of the delisted shares you want to sell, such as the ISIN number, quantity, etc.
- Sign and submit the DIS.
- Broker will then find a buyer for your delisted shares and facilitate the transaction.
Remember, this process might take longer than regular market transactions, and the price you receive for your shares may not be as lucrative.
Delisting Regulations
Delisting regulations in India are primarily dictated by SEBI (Securities and Exchange Board of India) under the SEBI (Delisting of Equity Shares) Regulations, 2009. Here are the key regulations that govern delisting:
- A company can voluntarily decide to delist its shares, but it must obtain approval from the board and shareholders.
- The exit price for delisting should be determined through reverse book-building.
- If a company is compulsorily delisted due to non-compliance, the promoters of the company are required to buy back the shares from the public shareholders.
- The company must ensure that at least one of its Promoters or Directors remains a director in the delisted company to address any grievances of shareholders.
For instance, in the case of the forced delisting of Amtek Auto, the promoters were obliged to offer an exit option to public shareholders as per the fair value determined by the independent valuer.
What Is Delisting Of Shares – Quick Summary
- Delisting of shares refers to the removal of a listed security from a stock exchange.
- It occurs when a listed company’s shares are removed from the trading platform of a stock exchange.
- Voluntary delisting occurs when a company willingly removes its shares from a stock exchange.
- Shares can be delisted due to various reasons like non-compliance, bankruptcy, company restructuring, or voluntary delisting.
- Two types of delisting exist – voluntary and compulsory delisting.
- Delisting regulations in India are governed by SEBI under the SEBI (Delisting of Equity Shares) Regulations, 2009.
Delisting Of Shares – FAQs
Delisting of shares refers to the removal of the listed security of a company from the stock exchange where it’s traded. This means that the shares of the delisted company are no longer available for trading on that stock exchange.
There are mainly two types of delisting – voluntary and compulsory. Voluntary delisting happens when a company willingly removes its shares from the stock exchange, while compulsory delisting occurs when a company is forced to remove its shares due to non-compliance or failure to meet the listing norms.
When a company gets delisted, its shares don’t disappear. Shareholders still hold their shares and can sell them off-market, but the process is usually complex and often offers lower prices than the market value.
When a stock is delisted, investors do not necessarily lose all their money. However, the shares become illiquid, making them difficult to sell. The value of these shares will be dependent on the company’s underlying financial health. If the company goes bankrupt, shareholders might lose their investment.
To remove delisted shares from your demat account, you can approach your Depository Participant (DP) with a request. The DP will then give you a Delivery Instruction Slip (DIS), which you must fill out and submit. The DP will then execute the transfer.
Yes, you can sell delisted shares. However, the process is not straightforward, like selling listed shares. You would need to sell them off-market, which a stockbroker can facilitate. The price at which you can sell delisted shares often depends on the demand and supply in the off-market place.
