Delisting

What is Delisting

The term “delisting” of securities means removal of securities of a listed company from a stock exchange where it is traded on a permanent basis. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange.

Delisting of securities may be compulsory or voluntary. Let’s know how different they are from each other. in compulsory delisting securities are removed from a stock exchange as a penal measure for not making submissions/complying with various requirements set out in the Listing agreement within the prescribed time frames whereas in voluntary delisting, company itself decides to remove its securities form stock exchange the securities of a company whereas

Now let’s see why companies voluntarily delist their securities. There might be number of reasons to delist but here are three main reasons of voluntary delisting:

1. Delay in strategic business decisions:

Due to the mandate of taking shareholders approval, the important strategic business decisions are often delayed which results in several adversities to the company which further forces the company to delist their securities from stock market.

2. Annual listing fee turns out to be a significant cost:

When benefits that the company is getting by listing its securities are not very much when compared to the amount it is annually paying to stay listed then the fee turns out to be a burden on the company and the company finally delists the securities from stock market.

3. Other costs of being a public entity:

Several costs like cost of reporting, audit & compliance costs might be high and albeit unnecessary to the company. And when the company is still not ready (or not in such conditions) to bear such costs then it decides to delist their securities.

The promoters have to comply with the procedural requirements as stated in SEBI (Delisting of Equity Shares) Regulations, 2009 in order to delist the equity shares,