Delisting of Shares
- As the name suggests delisting means removal of listed securities of a company from a stock exchange where it was traded.
- After Delisting Stocks of that company will not be trading on stock market permanently.
Delisting of Shares Types
There are two types of delisting :
- Voluntary Delisting
- Mandatory Delisting
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Voluntary Delisting
In case the company chose on its own to get his shares delisted.
Reasons associated in case of voluntary delisting.
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Formalities
As listed company generally carries a large no. of formalities and compliance as compared to delisted ones to avoid these hassles a company may opt to voluntary delist from stock exchange..
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Control
In case the promoters needs to enjoy freedom and control of the company Then they can opt for voluntary delisting.
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Private Equity(PE)
In case a company founds private players to invest in co. Then they may go for it.
Process of Delisting of shares from Stock Exchange
- Special Resolution : A Special resolution needs to be passed in the board meeting for delisting the shares with prior information to stock exchange.
- An application for in principle approval needs to be filed with stock exchange along with particulars & quantum of securities to delist. All pending dues to exchange needs to be cleared before filing such application.
- Investment Banker is appointed by the company to manage the whole process. He then get his escrow a/c opened and the estimated amount/Bank guarantee equivalent to buy back needs to be deposited there based on floor price of shares.
- Then a public announcement will be made with details in one English Newspaper, one Hindi newspaper and one in regional language where stock exchange is situated with complete details of :
- Floor Price
- Offer Price
- Opening and Closing dates of an offer
- Manner of accepting offer
- Name of Exchange where shares are delisted
- Minimum acceptance Conditions Name and details of Investment Bankers
- Objects of Delisting
- Detail of escrow account with amount deposited
- Post Delisting Shareholding
- Declaration by directors on compliance of all statutory Provisions of Securities Law.
- Then a letter of offer needs to be sent to shareholders within 45 Days to reach them atleast 5 days before bidding opening.
- Delisting is done through Book building and final price will be quoted by majority Shareholders. Then if promoter are agreeing to the decided price acceptance is communicated within 8 days of offer closure. Delisitng offer is successful if Promoter stake + PAC stake + Eligible bids accounts for 90% of issued shares otherwise same is deemed to be unsuccessful and cancelled.
- Once the final price is accepted by promoters and the final price is greater than Floor price (Point No. 3) then additional amount needs to be deposited in Escrow a/c and payment to be made to shareholders within 10 days of closure of offer. Once the acceptance crossed 90% then for remaining shareholders who have not participated, promoter can cancel their shares and remit funds to them.
- After completion of payment again application needs to be filed with stock exchange as final Application within 1 year for the request to delist the shares. After verification exchange will delist the shares and from date company will be delisted officially from exchange.
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Mandatory Delisting
In case there is something wrong done by a company then SEBI Mandatorily delist the securities of a company. As there are certain rules set by the stock exchange to be followed by every listed company, failure to do so leads to mandatory delisting.
Reasons for Mandatory Delisting
- If company is suffering losses in last 3 consecutive Years and its Net worth is Negative now.
- Companies Securities are suspended from trading for more than 6 months.
- Shares of company are not actively trading in last 3 years.
- Director or Officer Incharge is convicted for >3Years for non complying with SEBI regulations.
Thanks for enlightening me on delisting of shares.
The Information was very useful and helpful to me.