Delisting of equity shares is the permanent removal of equity shares of a listed
company (hereinafter company) from a recognized stock exchange (hereinafter
stock exchange). The delisting of equity shares by a company can be voluntary or
compulsory. If the delisting of equity shares is compulsory, the company is
compelled to delist its equity shares from the stock exchange. Whereas, if the
delisting of equity shares is voluntary, it is the wish of the company to delist
its equity shares from the stock exchange.
In India, the process for delisting of equity shares is provided under the SEBI
(Delisting of Securities of Equity Shares) Regulations, 2021 (hereinafter
Delisting Regulations). This article aims to provide an overview of the concept
of voluntary delisting of equity shares and an outline of the procedure for
voluntary delisting of equity shares from all the stock exchanges under
Types of voluntary delisting
Voluntary delisting can be further divided into three categories:
- Delisting from all the stock exchanges.
- Delisting from few stock exchanges.
- Delisting of small companies.
Circumstances in which the companies opt for voluntary delisting of equity
Usually, the companies opt for voluntary delisting of shares from the stock
exchange in the following scenarios:
When the market value of equity shares does not reflect the true and fair value
of the company for a long period of time.
- Merger and Acquisition
After the closure of an M&A transaction, equity shares of the merging or target
company are delisted from the stock exchange and equity shares of the resultant
company are traded.
For example After the merger of Ranbaxy with Sun Pharma, equity shares of
Ranbaxy were delisted from the stock exchange on 6 April 2015. The shareholders
of Ranbaxy received 0.8% of Sun Pharma in place of 1 equity share of Ranbaxy.
- Negligent trading
If there is negligent trading of equity shares of a particular company from a
long period of time. In such a scenario, the company may choose to voluntary
delist its equity shares from the stock exchange.
- Absolute ownership and control
When the promoters want absolute ownership and control of the company. The
company in such a situation can opt for voluntary delisting of equity shares.
Absolute ownership and control provide the promoters of the company with
For example: The equity shares of Alfa Laval India were delisted from the
National Stock Exchange and Bombay Stock Exchange in the year 2012, pursuant to
the delisting offer made by the promoter of the company (Sweden based Alfa
Laval Corporate AB) to the public shareholders.
- Compliance and related cost
The listed company may opt for voluntary delisting if it finds listing fees
payable to stock exchanges and professional fees of various professional engaged
by the company for compliance with various statutory requirements burdensome.
Circumstances in which delisting of equity shares is not permitted.
According to Regulation 4 of the Delisting Regulations, stock exchanges cannot
permit the delisting of equity shares of a company in the following scenarios:
- A period of 3 years has not expired from the listing of that class of
equity shares on any recognized stock exchange.
- If the instruments which are issued by the company and are convertible
into that same class of equity shares, that are sough to be delisted are outstanding.
- When the delisting is in pursuant to buyback of equity shares, including
a buy-back which is in pursuant to consolidation or division or part of the
equity share capital of the company, except in a scenario where three years
has elapsed from the date of completion of such buyback.
- If the delisting is in pursuant to preferential allotment and a period
of 6 months has not elapsed from the date of such allotment.
Procedure for voluntary delisting of equity shares from all stock exchanges
According to Regulation 7 of the Delisting Regulations, the company can delist
its equity shares from the stock exchanges, subject to the condition that exit
opportunity is provided to all public shareholders of the class of equity shares
which are sought to be delisted. In a scenario, where providing an exit
opportunity is compulsory then the procedure stated in Chapter IV and Part III
of Chapter V of Delisting Regulation needs to be followed which is stated below
Initial Public Announcement (Regulation-8)
When the promoters of the company decide to voluntary delist equity shares of
the company, on such date the company should make an initial public announcement
to all the stock exchanges on which equity shares of the company are listed, and
the stock exchanges should forward the information to the public shareholders. A
copy of the above announcement should also be sent to the registered office of
the company within 1 working day from the date of the initial public
Additionally, the initial public announcement should
Appointment of Manager to the offer (Regulation-9)
- Specify the reasons for delisting.
- Ensure compliance with sub regulations (2) and (5) of regulation 4 of
- Not omit any relevant information or contain any misleading information.
The promoters of the company are required to appoint a merchant banker as the
manager to the offer before making the initial public announcement. The manager
to the offer will carry out the initial public announcement and ensure that the
delisting process in compliance with the delisting regulations.
The regulation also prescribes the qualifications for the merchant banker who is
proposed to be appointed as Manager to the offer by promoters of the company
which are stated as follows:
Approval by Board of Directors (Regulation -10)
- The merchant banker should be registered with the Securities Exchange
Board of India (hereinafter SEBI).
- The merchant banker should not be an associate of the promoters.
Within 21 days of initial public announcement, the company should obtain the
approval of its Board of Directors with respect to the proposal of the promoters
to delist the equity shares of the company. The Board of Directors before
considering the proposal are required to appoint a Peer-Reviewed Company
Secretary (hereinafter CS) and provide him following information for carrying
out the due diligence:
- Details of buying, selling and dealing in equity shares by the promoters
or their related entities during the last two years from the date of the
board meeting held to consider the proposal for voluntary delisting of its
equity shares. The company should also provide the details of the top 25
shareholders of the company during the previous two years.
- The details of off-market transactions of all shareholders.
- The company should also provide any additional information beyond the
period of last two years if the CS thinks the information provided to him is
not sufficient to grant certification.
After, obtaining the above information CS has to carry out the due diligence and
submit the report to the Board of Directors. The report submitted by the CS
shall certify that buying, selling and dealing of equity shares of the company
by the promoters or its related entities, and by the top 25 shareholders during
the above-mentioned period complied with securities law.
The regulation also requires the Board of Directors of the company, to certify
the following while considering the proposal for delisting:
- The company is in compliance with the provision of securities law.
- The promoters and their related entities complied with the applicable
provisions of securities law in terms of the CS.
- The delisting is in the interest of the shareholders.
After arriving at the decision, the Board of Directors are required to inform
the decision to the stock exchanges along with the due diligence report of the
CS. The stock exchange will disseminate such information to the public
Shareholders approval through special resolution (Regulation -11)
The prior approval of the shareholders of the company is also required for the
voluntary delisting of equity shares. The approval of shareholders should be
obtained in the form of a special resolution, in which voting is done only
through postal ballot. The explanatory statement sent to the shareholders for
such resolution shall contain all the material facts with respect to delisting.
The special resolution passed by the shareholder will stand approved only if the
votes casted in favour of the resolution by the public shareholders are two
times the votes casted against it.
Application for in-principle (Regulation -12)
After obtaining the approval of shareholders, the company needs to make an
application to the concerned recognized stock exchange for in-principle approval
of the proposed delisting. The application should be submitted along with an
audit report covering the period of the last 6 months from the date of filing
The recognized stock exchange has to dispose off the application for
in-principle approval within 15 days from the receipt of the application. The
recognized stock exchanges while considering the application will take into
consideration the following:
Determination of discovered price (Regulation-20)
- Resolution of investors grievances.
- Compliance with SEBI regulations.
- Payment of listing fees to the stock exchange.
- Compliance with listing agreement.
- Pending litigation or action pending against the companies with respect
to its activities in the securities market or any other matter which has an
adverse impact on the interest of the shareholders.
The discovered price should be determined through reverse book building after
fixing the floor price. The Manager to the offer should disclose the discovered
price in the detailed public announcement and letter of offer. The floor price
used for determining the discovered price is calculated in terms of regulation 8
of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011.
The reference date for computing the floor price would be the date on
which the stock exchanges were required to be notified of the board meeting in
which the proposal of delisting of equity shares was considered.
The regulation also states that the promoters can provide an indicative price to
the shareholders, which should be higher than the floor price. The promoters are
also given a chance to revise the indicative price upwards before the bidding
Opening of Escrow Account (Regulation-14)
The promoters are required to open an escrow account with the scheduled
commercial bank, within 7 working days from obtaining approval of the
shareholders, deposit therein 25% of the total consideration to be paid to the
equity shareholders. The estimated amount is calculated based on the total
number of equity shares outstanding multiplied by the floor price or indicative
Further, the regulation provides that an escrow account should consist of either
cash deposits or bank guarantee in favor of the Manger to the offer, or a
combination of both. It can also be maintained at interest-bearing, with a
condition that funds are available when needed.
Public Announcement (Regulation -15)
The promoters are required to make a detailed public announcement within 1
working day of receipt of in-principle approval for delisting. The detailed
public announcement should be published in:
- One English national newspaper with wide circulation.
- One Hindi national daily newspaper with wide circulation.
- One regional language newspaper where the recognized stock exchange is
Lastly, the detailed public announcement should contain all the material
information relating to the delisting of equity shares.
Dispatch of letter of offer (Regulation -16)
The promoters are required to dispatch the letter of offer to the equity
shareholders, within 2 working day from the date of public announcement. The
regulation provides that letter of offer should be sent to all the public
shareholders whose names appear on the register of the company or depository on
the date of public announcement.
Further, it states that the letter of offer should contain all the relevant
disclosure that may necessary for the shareholders to make an informed decision.
The bidding form for use of shareholders for tendering shares should also be
attached with the letter of offer.
Bidding period (Regulation -17)
It is the period in which the shareholders tender their shares in acceptance of
the delisting offer made by the company.
The offer should be opened within 7 working days from the date of public
announcement. Further, the offer should remain open for 5 working days.
The discovered price will be determined after the bidding process. If the
promoters accept the discovered price, then they have to make a public
announcement in the same newspapers in which the detailed public announcement
was made, stating that the bidding process was successful.
Minimum number for equity shares (Regulation -21)
An offer is deemed to be successful if:
The post-offer shareholding pattern of the promoters along with persons acting
in concert reaches 90 % of the total issued share capital excluding
Payment for consideration (Regulation -24)
- Shares held by a custodian against which depository receipt have been
- Shares held by a Trust for implementing an Employee Benefits Scheme
under the Securities Exchange Board of India (Shares Based Employees
Benefit) Regulations, 2011.
- Shares held by vanishing or struck off companies; shares transferred to
the Investor Protection and Provident Fund Account.
The consideration has to be paid to the public shareholders whose bids are
accepted at the indicative price or discovered price whichever is higher. The
regulation provides for two scenarios for the payment of consideration to the
Application to Stock Exchange (Regulation 25)
- If the discovered price is equal to the floor or indicative price,
payment to the shareholders has to be made through secondary market
- If the discovered price is higher than the floor price or the indicative
price, then the payment to the shareholders has to be made within 5 working
days from the date of the public announcement of the discovered price.
After the success of the offer, an application should be made to the stock
exchange along with all the necessary proofs of providing exit opportunity to
the public shareholders.
Delisting order by the recognized stock exchange (Regulation-25)
The stock exchange is required to dispose off the application within 15 working
days from the receipt of the application. After the disposal, equity shares of
the company are permanently delisted from the recognized stock exchanges.
Circumstances in which the company does not have to follow the procedure under
the Delisting Regulations
Regulation 3 (2) of the Delisting Regulations provide for two situations in
which the companies do not have to follow the procedure prescribed under
- When equity shares of the company are listed and traded in innovators
growth platform of a recognized stock exchange without making a public
- When the delisting of equity shares is done pursuant to resolution plan
under section 31 of the Insolvency and Bankruptcy Code, 2016, If such plan
- Lays down a specific procedure for delisting of equity shares.
- Provides for exit option to the existing public shareholders at a price
stated in the resolution plan.
Piramal Housing Capital and Finance acquired Dewan Housing Finance
Corporation (DHFL) through Corporate Insolvency Resolution Process. The
resolution plan provided for the delisting of equity shares of DHFL, so it does
not have to follow the procedure prescribed under the delisting regulations.
Delisting of equity shares may be a perfect step for the companies, whose stock
prices faced a sharp fall due to the unprecedented situation caused by Covid
- Securities Exchange Board of India (Delisting of Equity Shares)
- Monisha Chaudhary, Procedure of Delisting of Equity Shares on Stock
Exchange, Swarita Advisors, ( Aug, 28,2019), https://swaritadvisors.com/learning/procedure-for-delisting-of-equity-shares-on-stock-exchange/.
- Mohit Gogia, Kanika Khanna & Kastubh Madhavan, Mondaq, (Jul, 02,