Delisting Of Shares

Ever wondered what delisting is? Delisting, as the name suggests, is when a company that was publicly traded removes its shares or delists from the stock exchange. A stock or security may be delisted either voluntary or involuntary. Delisting is usually when a company ceases operations, merges or restructures, declares bankruptcy, or fails to meet listing requirements. The company pays investors to delist and then withdraws its stock from the exchange. If a company does not follow the rules, the stock exchange may force it to delist. Simply put, delisting is when a stock is permanently removed from the stock market.

How do I delist shares?

Listing standards must be met by a company. Each exchange has its own rules and regulations.

Companies may choose to delist their company when they see that the cost of being listed publicly is more costly than the benefits. When companies are purchased by private equity firms, they can ask for delisting. New shareholders will reorganize them.

First, let's look at voluntary delisting. Investors are left in a difficult position when forced delisting occurs. They have no choice but to sell their stocks at the current price.

Voluntary Delisting

A premium is usually offered to shareholders if a company wants to delist voluntary. The transaction is removed from the exchange when an investor sells shares that have been delisted. Any profit made is considered capital gain. Capital gains tax is not applicable if the delisting occurs within a year of the purchase. If the delisting occurs within one year, capital gains tax is not charged. However, any gain made will be subject to the tax slab of the individual.

Involuntary Delisting

Involuntary removal is when the regulations are violated or the minimum financial expectations are not met. The term "monetary standard" refers to the ability to maintain the share price at a minimum level, financial ratios, and sales level. The listing exchange issues a warning to companies that they have not met the listing requirements. The listing exchange will delist the stock if the company fails to address the issue.

What does it mean for you?

The question now is how does a delisting affect a shareholder? If a company decides to delist its shares, it will make payments to shareholders in order to return their shares. Then, the shares will be removed from the exchange. If the total shareholding of the acquirer, as well as the shares offered to the public shareholders, is 90% or more of the company's share capital, the delisting will be considered successful.

It is rare for a voluntary delisting to occur suddenly. Investors have enough time to sell their stock. Investors who choose to keep their shares will still be legally and beneficially owned by the company.