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
In case the company chose on its own to get his shares delisted.
Reasons associated in case of voluntary delisting.
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..
In case the promoters needs to enjoy freedom and control of the company Then they can opt for voluntary delisting.
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.
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.