How to Remove Delisted Shares from Demat Account

Delisted shares can linger in your demat account, but understanding the process to remove them is crucial for maintaining a clean investment portfolio.

When a company’s shares are delisted from the stock exchange, they cease to be traded publicly, making them illiquid. Yet, they do not automatically vanish from an investor’s demat account. These delisted shares remain as part of your holdings, often causing confusion about their value, potential for sale, or whether they can be removed at all. Whether delisting occurred voluntarily or as a regulatory consequence, understanding your rights and the options available is key.

This guide explains what delisting means, how it impacts your demat holdings, and the detailed processes you can follow to clean up your account by removing or managing these securities.

Delisting of shares refers to the process by which a company’s shares are removed from a stock exchange, making them no longer available for public trading. This means the shares cannot be bought or sold on that exchange anymore, effectively taking the company out of the public market.

There are two types of delisting:

Voluntary Delisting

This occurs when a company decides to go private or delist from the exchange for strategic reasons, such as:

• Mergers or acquisitions
  

• Plans to operate as a private entity
  

• Regulatory or cost-related burdens of being a listed entity
  

Compulsory (Involuntary) Delisting

This is imposed by the exchange due to:

• Non-compliance with regulatory requirements
  

• Financial mismanagement
  

• Failure to meet listing norms
  

In both cases, the shares continue to exist in your demat account until you take further action.

Even though the company’s shares are delisted from the exchange, they still represent ownership in that company. This is why they remain visible in your demat account as part of your holdings. The shares become untradeable in the conventional stock market but can still be transferred, gifted, or sold through alternate channels.

This situation can lead to portfolio misrepresentation, especially if you are unaware of their illiquid status. Hence, timely action to address such holdings becomes necessary.

The options available to remove or deal with delisted shares depend on whether the delisting was voluntary or compulsory.

Step 1: Check for Exit Window Opportunity (Voluntary Delisting Only)

In voluntary delisting, SEBI mandates that the company provides an exit window to public shareholders. This means you can sell your shares back to the promoters at a price determined by a Reverse Book Building process.

Key Considerations:

• This opportunity is time-bound (usually open for a few weeks post-delisting).
  

• The buyback price is often at a premium over the prevailing market rate before delisting.
  

Step 2: Explore Off-Market Transfers

If the company does not provide an exit offer, or the offer has expired, you can consider transferring your shares off-market. This involves:

• Filling a Delivery Instruction Slip (DIS) from your depository participant (NSDL/CDSL-linked DP).
  

• Mentioning the receiver’s demat account details.
  

• Submitting the DIS to your broker/DP.
  

Note: Off-market transfers are also commonly used for gifting shares.

Step 3: Use Over-the-Counter (OTC) Platforms

There are dedicated portals that help investors liquidate delisted shares by matching them with interested buyers. These are often OTC platforms registered under SEBI rules.

Risks and Points to Remember:

• Due diligence is essential to avoid fraud.
  

• The liquidity may be very low.
  

• Pricing is entirely negotiated between the buyer and seller.
  

Step 4: Rematerialisation of Shares

If you want to convert your delisted shares into physical form (i.e., paper certificates), you can opt for rematerialisation.

Process:

1. Submit a Rematerialisation Request Form (RRF) to your DP.
   

2. Pay applicable charges.
   

3. Receive physical share certificates by post.
   

Purpose: Rematerialisation makes it easier to transfer shares informally (e.g., as gifts) and keeps your demat account clean.

Step 5: Write Off as a Capital Loss (Subject to Eligibility)

If the delisted company is non-operational or you have no other way to exit, you may consider writing off the investment.

Requirements:

• Maintain records of the purchase price and attempt to exit.
  

• Consult a tax advisor to explore whether you can claim capital loss benefits under Income Tax rules.
  

1. Tax Implications

Any sale or transfer of shares, listed or delisted, can trigger capital gains or loss. Ensure you:

• Maintain proper documentation.
  

• Understand applicable tax treatment.
  

• Declare capital losses (if allowed) in your income tax return.
  

2. Documentation

For any off-market transaction, keep the following:

• Copy of the DIS form
  

• Receiver’s acknowledgement
  

• PAN and KYC documents (if needed)
  

• Signed agreement or gift deed, in case of a family transfer
  

3. Impact on Portfolio

Delisted shares clutter your demat account and misrepresent your true portfolio value. Removing them can help with cleaner reporting and better portfolio tracking.

Example 1: Vedanta Ltd

In 2020, Vedanta announced a voluntary delisting but later failed due to insufficient shareholder response. However, the offer process educated many retail investors about exit options.

Example 2: Satyam Computers

Following fraud revelations, the company was eventually delisted. Shareholders faced challenges in valuation and liquidity.

Example 3: Kingfisher Airlines

Compulsorily delisted due to regulatory violations. Investors holding shares are still stuck with illiquid holdings.

Delisted shares are a reality of long-term investing. While their presence in your demat account may not pose an immediate financial risk, inaction can lead to cluttered holdings and confusion. Investors should act decisively—either by availing the exit window during voluntary delisting, using off-market transfer options, or rematerialising these shares for better control.

A proactive approach not only ensures cleaner portfolios but also helps in accurate tax filing and financial planning.

This content is for educational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.