What is delisting?
The term “delisting” of securities means removal of securities of a listed company from a stock exchange. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange.
Delisting of securities maybevoluntary or compulsory. Let’s know, how different are they from each other. In voluntary delisting, company itself decides to remove its securities form stock exchangethe securities of a company whereas in compulsory delisting securities are removed from a stock exchange as a penal measure for not making submissions/complying with various requirements set out in the Listing agreement within the time frames prescribed.
Now let’s see why companies voluntarily delist their securities. There might be number of reasons to delistbut here are three main reasons of voluntary delisting:
- Annual listing fee turns out to be a significant cost:
When benefits that the company is getting by listing its securities is not very much when compared to the amount it is annually paying to stay listed then the fee turns out to be a burden on the company and company finally delists the securities from stock market.
- Delay in strategic business decisions:
Due to the mandate of taking shareholders approval, the important strategic business decisions are often delayedwhich results in several adversities to the company which further forces the company to delist their securities from stock market.
- Other costs of being a public entity:
Several costs like cost of reporting, audit &compliance costs might be high and albeit unnecessary to the company. And when the company is still not ready (or not in such conditions)to bear such coststhen it decides to delist their securities.
In order to delist the equity shares, the promoters have to comply with the procedural requirements as stated in SEBI (Delisting of Equity Shares) Regulations, 2009.
To grow your business, you need to know what is the best time for what you want to do i.e., right decisions on right time are very crucial for a company’s growth.Your strategy is your business, so make one which helps you grow and not fall.