LISTING & DELISTING

 LISTING
Listing means admission of a company’s security to a platform of stock
exchange.
 DELISTING
 Delisting is the removal of listed security from stock exchange.
 It means company’s securities would no longer be tradable and marketable.

TYPES OF DELISTING

1) COMPULSORY DELISTING
 Compulsory delisting refers to the permanent removal that has become
necessary for a company to delist.
 It takes place when the company does not meet its minimum financial standards.

2) VOLUNTARY DELISTING
Voluntary delisting refers to be listed in at least one platform without bidding of a
security.

CAUSES OF STOCKS DELISTING

 Company Bankruptcy or Dissolution
 Financial Crisis
 Short Selling of Stocks
 Financial Fraud
 When the company do not meet the regulation of stock exchange then their stock
get delisted.
 When the company performance is not up to the mark which is required by the
stock exchange then that stock get delisted.
 Poor return to their shareholders is the reason of stock get delisted.
 When the company do not maintain the minimum stock price then their stock get
delisted from stock exchange.
 When the company bankrupt then their share get delisted by stock exchange.
 Often company want to merge with other company so they delisted themselves
from the stock market.

WHAT HAPPENS WHEN A STOCK GET DELISTED FROM STOCK

EXCHANGE?
 Simply, Delisted Stocks are removed from the exchanges they used to trade on,
and instead, they're traded "over the counter" (OTC).
 These OTC stock are traded through "market makers," and pricing information is
provided by either the Over-the-Counter Bulletin Board (OTCBB) or Over-the-
Counter Link LLC.
REASONS OF COMPULSORY & VOLUNTARY DELISTING
 REASONS OF COMPULSORY DELISTING
 Violation of listing agreement
 Non-Payment of listing fees
 Non-Compliance with regulations
 Non compensation of investor complaints
 Unfair trading practices
 Fake Certificate by Management
 Reduction in number of public holders

 REASONS OF VOLUNTARY DELISTING

 Unable to pay listing fees
 Capital base is small
 Inactive Trading
 Business Closure
 Company becomes Sick
 Merger or Acquisition

ADVANTAGES & DISADVANTAGES OF STOCK DELISTING

 ADVANTAGES
 Capital saving increases if your company is registered in stock exchange then
you must need to issue minimum shares in the market in order to remain listed in
the stock exchange. So, if company delisting their shares then it is up to the
company choice of how much share they want to issue and also not required by
law to show disclosure.
 The listing expenses and the annual trading cost of the company are saved when
the company decides to delist itself.
 If the company delisting then it is not mandatory to pay dividend regularly for
those companies.
 Companies are not required to show disclosure of financial record.
 Delisting of shares from the stock exchange also reduces the risk of the takeover
of the company in the capital market, and the promoters can retain their
ownership and shareholding
 The company does not have to bear the systematic or the market risk when it
delists its shares and is safe from the market speculation also.

 DISADVANTAGES
 After delisting, the company cannot raise funds from public markets and also
need to re-issue the shares if it wants to list the company again.
 The company loses the public trust of the market and may also lose their market
share since the customers also lose trust in the company’s product.
 It can also affect the book value of the company.
PROCESS OF STOCK DELISTING
 Resolution should be passed by board approving the delisting process and
compliance w.r.t. security laws is to be certified by them.
 Before passing of board resolution, company should intimate about proposed
delisting to concerned stock exchange and appoint a merchant banker to conduct
due diligence and submit report to stock exchange .
 Approval from shareholders is required by way of Special Resolution passed by
postal ballot.
 After above approval, application for in-principle approval should be filed with
concerned PSE. Within one year from passing of Special resolution, final
application should be submitted to stock exchange.
 Merchant Banker will perform reverse book building process.
 Now, offer prices will be obtained from all shareholders.
 Final delisting price will be the price where approval of 90% of shareholders (in
number of shares) is obtained.