When a company decides to remove its shares from the stock exchange and isn’t available for trading anymore is called delisting. After the company makes the share unavailable for trading it becomes a private company. If the shares of a certain company are available on multiple stock exchange platforms and are removed from only one of the stock exchange it is not considered as delisting. Removal from all the stock exchanges which unable people from trading is called as delisting.
Voluntary delisting:
when a company voluntarily decides to remove all its shares and make it unavailable for trading. In this type, the company has to pay all the shareholders in exchange for all the shares held by them. A company goes into voluntary delisting when a change in the entire structure of the company occurs. This can occur when the organization is acquired by an investor who desires a majority share in the company. Another reason could be exchange regulations which may hinder the company's functioning. To avoid hindrance in the company functioning it may decide to delist all the shares.
Involuntary or Compulsory Delisting: When a company is compelled by the regulatory authority to delist all the shares and stop trading it is called involuntary delisting. There could be various reasons or situations when the company shares are involuntary or compulsorily delisted. Following are a few of the reasons for delisting of shares involuntary: - When the company fails to comply by the regulations set by exchange it can go under compulsory delisting - When the shares are traded inconsistently over the past three years it calls for delisting of securities for six months - If the net worth of the company is negative due to huge losses that occurred in the past three years the company shares are delisted involuntary.
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