Delisting of securities means permanent removal of securities of a listed company from the stock exchange where it was registered. As a result of this, the company would no longer be traded at that stock exchange.
It may happen either when the company does not comply with the guidelines of the stock exchange, or that the company has not witnessed trading for years, or that it voluntary wants to get delisted or in case of merger or acquisition of a company with/by some other company. So, broadly it can be classified under two head:
- Voluntary delisting.
- Compulsory delisting.
1) Voluntary Delisting: Under this the Company gets voluntarily delisted from the Recognised Stock Exchange. Here a listed company decides on its own to permanently remove its securities from a stock exchange. This happens mainly due to merger or amalgamation of one company with the other or due to the non-performance of the shares on the particular exchange in the market.
It can further be classified in two types:
a) Delisted from all Recognised Stock Exchanges. (Require to give Exit Opportunity)
b) Delisted from some of the Recognised Stock Exchanges (RSE) i.e.:
- If after delisting the company still remains listed on the RSE which has Nationwide Trading Terminals – No need to give exit opportunity. (For e.g. A Company is listed on NSE, BSE and MSEI. It proposes to get itself delisted from BSE and MSEI only and proposes to remain on NSE, then there is no need to give exit opportunity to its shareholders.)
- If after delisting the company remains listed on the RSE which doesn’t have Nationwide trading Terminal. Requires to give exit opportunity.(For e.g. A Company is listed on NSE, BSE and MSEI. It proposes to get itself delisted from BSE and NSE only and proposes to remain on MSEI, then there is a requirement to give exit opportunity to its shareholders.
2) Compulsory Delisting: When the RSE by giving an Order to the listed entity delist its equity shares by giving an opportunity of being heard. This type of delisting is a penalizing measure at the behest of the stock exchange for the Company for not making submissions/comply with various requirements set out in the Listing agreement within the time frames prescribed.
The legal aspects of Delisting will be covered in SEBI (Delisting of Equity Shares) Regulations, 2021.
The Delisting in case of small companies have different eligibility norms and the procedure.
Delisting also needed to be handled by a SEBI Registered Merchant Banker. We at LMSPL handles an entire range of delisting process for our listed clients.