What Happens When a Company Gets Delisted

When a company is delisted, its stock is removed from the stock exchange, halting public trading and reducing liquidity. Shareholders still own their shares but can only sell them on a less liquid over-the-counter (OTC) market, often at a lower price or in private transactions.

Delisting occurs when a company’s shares are removed from an exchange like BSE or NSE. This can happen through:

• Voluntary delisting: Initiated by the company—e.g., for cost reasons or due to a takeover.
  

• Regulatory/mandatory delisting (also known as Compulsory Delisting): Enforced by the Securities and Exchange Board of India (SEBI) when companies fail to meet requirements like minimum public shareholding, disclosure norms, or financial reporting standards.
  

If a company opts for voluntary delisting, shareholders are usually offered an exit route through:

• Reverse book-building: Shareholders tender their shares at prices they deem acceptable.
  

• Exit price determination: The final buyback price is decided based on the bids received and applicable norms.
  

• Payment and settlement: Accepted shareholders receive the revised price for shares tendered, and demat accounts are updated accordingly.
  

After delisting, shareholders cannot trade the company’s shares on the exchange, but in most cases a structured exit offer is provided as part of the process

In cases where delisting is enforced due to non-compliance, several consequences follow:

• Shareholders no longer have access to public markets to sell their shares.
  

• The company may continue privately, but shares can only be traded through off-market or Over-the-Counter (OTC) platforms, often at lower liquidity and prices.
  

• Shareholder rights remain, but accessing those may require separate agreements or arrangements.

Here’s what happens to shareholders when a company is delisted:

• Trading halts: Shares no longer trade on stock exchanges.
  

• Valuation challenges: Without public pricing, determining fair value becomes difficult.
  

• Exit difficulty: Selling becomes more complex and limited to private deals.
  

• Dividend entitlement remains unchanged, unless altered by corporate resolution.
  

• Company may go private, restructuring its operations and shareholder rights.

For shareholders of delisted companies, the following options are typically available:

• Participate in the exit offer: In voluntary delisting, take advantage of reverse book-building to tender shares.
  

• OTC or off-market trades: Engage with brokers or private buyers to sell shares directly.
  

• Remain invested: Hold onto shares if confident in the company's private prospects or future listings.
  

• Engage in legal or arbitration channels: If terms were unfair or not followed correctly, shareholders may have recourse through SEBI or courts.
  

Common factors to review when assessing delisting risk include

• Review company compliance: Check financial reporting history and adherence to listing norms.
  

• Understand delisting proposals: Evaluate exit price fairness, timelines, and legal safeguards.
  

• Monitor liquidity: Stocks with thinner trading volumes are often more prone to delisting.
  

• Stay informed about regulatory changes: Changes in SEBI listing rules can affect company status.
  

Delisting can signal a significant shift—from a publicly tradable stock to a restricted or private holding. Investors must understand whether the delisting is voluntary or enforced, as it directly impacts liquidity and exit options. Staying informed about company announcements and SEBI guidelines helps clarify the steps involved in a delisting process.

This content is for informational 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.