Delisting is a process in which the shares of a listed company have been completely removed from the stock exchanges for buying and selling purposes. These shares are regulated by the market regulator, the Securities and Exchange Board of India (Sebi) and cannot be traded on NSE and BSE. Think of it as the reverse process of an IPO, where a public company becomes private.
The delisting of shares, whether involuntary or voluntary, can have a financial impact on the investors who hold those shares. In the case of a voluntary delisting, the companies choose to delist and opt for the definitive delisting of the securities from the stock exchange. This may be due to mergers with another company, listing costs outweighing its benefits, or being bought by private equity firms. While involuntary delisting refers to forced withdrawal of shares of a listed company due to reasons such as failure to follow listed guidelines, low share price or late filing of report. But, even if you cannot sell your shares on any stock exchange, there are still options by which you can calculate and claim those losses.
Even if the shares are delisted from the stock exchanges, they are still in your demat account because the delisting cannot amount to the extinction of the shares or your rights to the shares. There are ways to claim stock losses such as:
- After being delisted, shares can continue to be traded over-the-counter on the OTC bulletin board and shareholders can still trade the stock, although the market is likely to be less liquid.
- You can transfer these shares from your demat account through off-market transactions at a very nominal price to someone you know. The holding period requirement would be 24 months to qualify as a long-term loss, but you will be able to benefit from indexing to the cost of these shares.
3. The loss incurred by a written-off account can be adjusted against your gains under the heading “Capital gains”, as income under this heading generally only becomes taxable upon transfer of the fixed asset you hold. In accordance with the provisions of income tax laws, gains are taxable and losses incurred on the transfer of capital assets may be deducted from other gains.
Whether a company is voluntarily or involuntarily delisted, you as an investor will always have the ability to unload your shares. Sebi has ensured that the delisting does not directly affect the rights or claims of shareholders on the delisted company. Delistings can provide profitable investment opportunities or shareholders can lose money.
The author is Founder and CEO, Alice Blue)