Definition
The removal of a company's shares from trading on a stock exchange — voluntary delisting (at the company's initiative) requires an exit offer to public shareholders at a price discovered through a reverse book-building process.
Delisting under SEBI (Delisting of Equity Shares) Regulations, 2021 removes a company's shares from stock exchange trading. Voluntary delisting conditions: (a) special resolution with 90%+ approval; (b) the promoters/acquirers launch a reverse book-building (RBB) process to discover the exit price; (c) a minimum 25% of the non-promoter shareholding must participate in the exit offer and their tendered price must be accepted by the acquirer (otherwise the delisting fails); (d) promoter shareholding post-delisting must be at least 90% (meaning they must acquire at least 90% of total shares). The exit price is the 'floor price' determined through RBB — the minimum price at which sufficient non-promoter shareholders are willing to exit.
Statutory Definition
Regulation 2(1)(h), SEBI (Delisting of Equity Shares) Regulations, 2021: 'delisting means permanent removal of the equity shares of a listed company from all or any recognised stock exchanges where such shares are listed.' Regulation 8(1): 'A company shall not delist its equity shares unless a special resolution is passed by its shareholders and the number of votes cast by public shareholders in favour of such special resolution is at least 2 times the number of votes cast against it.'
Etymology & Origin
From 'de-' (Latin prefix meaning removal) + 'listing' (the inclusion of a company's shares on a stock exchange for trading). Delisting is the removal (de-) from the exchange's 'list' of traded securities.
Full Legal Analysis
Delisting: Taking a Company Private
Going public (IPO) is celebrated as a milestone; going private (delisting) is less glamorous but sometimes strategically necessary. When a listed company’s shares are thinly traded, the compliance costs of listing outweigh the capital-raising benefits, or when the promoter wants to operate without quarterly earnings pressure, delisting offers an exit from public markets. The law ensures that this exit is fair — requiring an RBB-discovered price that gives public shareholders a genuine exit opportunity.
Reverse Book Building: Price Discovery
The Reverse Book Building (RBB) process is the mechanism for determining the delisting exit price: (a) The promoters announce a floor price (minimum) based on the regulatory formula (VWAP, book value, etc.). (b) Public shareholders bid their shares at prices they are willing to accept (at or above the floor price). (c) The promoters can accept the 'discovered price' — the price at which 25% of non-promoter shareholders have tendered. (d) If the promoters accept, delisting proceeds; if they reject (the discovered price is too high), the delisting fails and the company remains listed. The RBB is unusual in that shareholders set the price — the more they want to exit, the higher the discovered price; the less they want to leave, the closer to the floor price.
2021 Delisting Regulations: Key Changes
SEBI's 2021 Delisting Regulations updated the framework: (a) A fixed price option was introduced alongside the RBB route — promoters may offer a fixed price at a 15% premium over the RBB floor if they meet certain conditions; (b) Compulsory delisting provisions were strengthened for non-compliant listed companies; (c) The definition of 'floor price' was clarified and aligned with other SEBI regulations.
“Delisting is the promoter saying: I want my company back. The SEBI process says: you can have it — but only if you pay every public shareholder a fair price for their shares. The reverse book-building lets the market speak that price. If the market price is too high for the promoter’s taste, the company stays listed.”
