Process for Delisting a Public Limited Company

Introduction
Delisting refers to the removal of a Public Limited Company’s shares from a recognized stock exchange, making them no longer available for public trading. This process can be voluntary—initiated by the company—or compulsory, due to regulatory non-compliance. Delisting is governed by the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021 for listed companies and relevant provisions of the Companies Act, 2013. This article outlines the key steps involved in the delisting process of a Public Limited Company in India.

Types of Delisting
Delisting can be categorized as:

• Voluntary Delisting: Initiated by the company or promoters to exit the stock exchange for strategic reasons such as restructuring, privatization, or low market activity.
  
• Compulsory Delisting: Enforced by the stock exchange due to non-compliance with listing norms, fraudulent practices, or prolonged suspension.
  

Preconditions for Voluntary Delisting
Before initiating voluntary delisting, the company must ensure:

• Minimum 25% of public shareholding is held by public investors.
  
• No delisting offer has been made in the last 6 months.
  
• Listing has existed for at least 3 years on the stock exchange.
  
• There are no pending penalties or litigation from the regulator or exchanges.
  

Board and Shareholder Approval
The process begins with a Board resolution approving the proposal for delisting. This is followed by obtaining shareholder approval via a special resolution passed through postal ballot or e-voting. At least two-thirds of the public shareholders must approve the delisting for it to proceed further.

In-Principle Approval from Stock Exchange
Once shareholders approve the proposal, the company must seek in-principle approval from the concerned stock exchange(s). The application must include detailed documentation, such as rationale for delisting, audit reports, compliance certificates, and relevant disclosures.

Appointment of Merchant Banker
The company appoints a SEBI-registered merchant banker to manage the delisting process. The merchant banker is responsible for due diligence, determining the floor price, and managing the reverse book building (RBB) process.

Reverse Book Building Process
The reverse book building (RBB) is a transparent price discovery mechanism used to determine the exit price for public shareholders. Public shareholders bid at or above the floor price. The final price at which the company acquires the required number of shares (typically 90% of the total shareholding) becomes the exit price.

Payment and Share Acceptance
If the discovered price is acceptable to the promoters and sufficient shares are tendered, the company proceeds with payment to shareholders within 5 working days and completes the share buyback. If conditions are not met, the delisting offer fails, and shares remain listed.

Final Approval and Delisting Order
After successful completion of the buyback and settlement, the company applies for final delisting approval from the stock exchange. Once granted, the company’s shares are officially delisted and cease to be traded on the stock market.

Post-Delisting Obligations
Post-delisting, the company must:

• Provide exit opportunities for remaining shareholders for at least one year.
  
• Continue compliance with other applicable corporate laws.
  
• Restrict re-listing of shares on any recognized stock exchange for at least 3 years, unless approved by SEBI.
  

Conclusion
Delisting a Public Limited Company is a structured and heavily regulated process designed to protect public shareholders and ensure market transparency. From board approval to reverse book building and settlement, every step involves legal scrutiny and public participation. Whether voluntary or compulsory, delisting significantly changes the company’s relationship with public investors and shifts its reporting and governance obligations. A well-executed delisting can enable strategic flexibility, cost savings, and long-term corporate restructuring.

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