Delisting of Shares Under SEBI Regulations: Voluntary vs Compulsory Route
A company can leave the stock exchange in two very different ways — one initiated by its own promoters wanting to take it private, the other forced on it by the exchange for non-compliance — and the exit price mechanics, and outcomes for public shareholders, differ sharply between the two.
Voluntary delisting — promoter-initiated
An acquirer (typically the promoter group) seeking to take a company private initiates voluntary delisting, which requires:
- Shareholder approval via special resolution, with the votes cast by public shareholders in favour required to be at least twice the votes cast against.
- Making a public exit offer to public shareholders, with the exit price determined through a reverse book building process — public shareholders tender their shares at a price of their choosing (at or above the floor price), and the discovered price is determined based on where cumulative tendered volume meets the acquirer's target.
- The delisting is successful only if the acquirer's post-offer shareholding, combined with shares validly tendered, reaches at least 90% of the total issued shares (or the applicable higher threshold specified for certain categories) — if this is not reached, the delisting fails and the company remains listed.
Compulsory delisting — exchange-initiated
Compulsory delisting is initiated by the stock exchange itself (not the company or its promoters), typically triggered by sustained non-compliance with listing conditions — extended suspension of trading, persistent failure to comply with LODR filing requirements, or other serious regulatory violations. Unlike voluntary delisting:
- There is no reverse book building process — the exit price for public shareholders is instead determined by an independent valuer appointed for the purpose.
- The promoters of a compulsorily delisted company face specific restrictions — including being barred from accessing the securities market and from becoming director of any listed company for a specified period.
Why this distinction matters for shareholders
Public shareholders in a voluntary delisting have real influence over the outcome — through the reverse book building price discovery and the special resolution voting threshold, they can effectively block a delisting attempt priced too low, or one they don't support. In a compulsory delisting, shareholders have no equivalent negotiating mechanism — they are dependent on the independent valuer's determination of fair value, with the company's exit from the exchange already effectively decided by the regulatory action itself, not by a negotiated shareholder process.
What happens if a voluntary delisting attempt fails
If the 90% (or applicable) threshold is not reached through the reverse book building process, the delisting offer fails, the company remains listed, and any shares already tendered are returned to shareholders (the acquirer does not get to partially acquire and force delisting on a lower participation rate) — this "all or nothing" design is a deliberate protection ensuring an inadequately-priced exit offer that fails to attract sufficient shareholder participation cannot be used to squeeze out a smaller number of holdouts at a below-market price.