If you’ve ever owned shares in a company, you’ve likely seen them traded on a stock exchange like the NSE or BSE. But what happens when a company’s shares are no longer available for trading? This is called delisting. While it might sound complicated, it’s a fairly straightforward concept. In simple terms, delisting is when a company’s shares are taken off a stock exchange, meaning you can no longer buy or sell them there.

Delisting can happen for many reasons. Let us try to understand how it works, what happens to your shares, and what you should watch out for.

What is Delisting?

Delisting occurs when a company’s shares are taken off the stock exchange, making them no longer available for public trading.

There are two main types of delisting:

1. Voluntary Delisting: When a company decides to remove its shares from the stock exchange is known as voluntary delisting. This could be part of a bigger plan, like taking the company private, cutting down on regulatory costs, or allowing a major investor to buy out smaller shareholders.
2. Involuntary Delisting: When a company is forced to leave the exchange is known as involuntary delisting. This can happen because of serious issues like not following the exchange’s rules, financial troubles, or not meeting certain standards required to stay listed.

What Happens to Your Shares After Delisting?

When a company you’ve invested in undergoes delisting, you retain ownership of your shares, but how you manage them will vary based on the type of delisting involved.

• In Voluntary Delisting: In this case, companies usually give you a way out. They offer to buy back your shares at a specific price, often higher than the current market price, which can be a good opportunity to cash out. This price is called the exit price.
• In Involuntary Delisting: This situation is more problematic. You’re still the owner of your shares, but they’re no longer easy to trade. Without being on an exchange, your shares lose liquidity, meaning it’s tough to find someone to buy them from you. However, shares can still sometimes be sold through private or over-the-counter (OTC) deals, though it can be tricky and you may get a lower price.

The Shares Delisting Process

For voluntary delisting, the company has to follow certain steps, and these steps ensure that the shareholders are kept in the loop.

1. Company Decision: The company’s board of directors first agrees that delisting is the best option. This could be because the management wants to reorganize the company, cut costs,  or go private.
2. Shareholder Approval: In most cases, the company needs approval from the shareholders (people like you). This happens through a voting process, where a large majority must agree to the delisting.
3. Exit offer: After the decision is approved, the company offers an exit price for shareholder who want to sell their shares. This price is often decided through a process where shareholders indicate how much they want for their shares, and the company buys back the shares at the agreed price.