When a share is delisted, trading ends on the marketplace where the share was previously listed. The shareholder does not, however, automatically lose their holding. The shares remain and still represent an ownership stake in the company, provided that the company continues to exist.
The biggest change is that ongoing stock exchange trading disappears. It often becomes harder to find a buyer, establish a current market price and follow the company's development through public reporting. Custody may also need to change, especially if the shares are held in an investment savings account (ISK, a Swedish account type).
After delisting, a previously listed share can take on many of the characteristics associated with unlisted shares. At the same time, the circumstances depend on why the delisting takes place, how the company continues its business and whether there is a functioning secondary market after the last trading day.
What does a delisting mean?
A delisting means that the share is removed from trading on a regulated market or other trading platform. The marketplace sets the last trading day, after which it is no longer possible to place ordinary exchange orders in the share via the same order book. The company can nevertheless continue its business with the same company registration number, assets, liabilities and shareholders.
Delisting therefore changes the form of trading rather than the ownership itself. The shareholder's financial and company-law rights normally remain, for example the right to vote at the general meeting and the right to future dividends. Being able to use those rights in practice requires that the ownership is correctly registered in a central securities register or in the company's share register.
A delisting does not have to be permanent either. A company can later apply for a new listing or move the share to another trading venue. Such a process requires the company to meet the conditions of the new marketplace and does not mean that trading resumes automatically.
Voluntary and forced delisting
In a voluntary delisting, the company takes the initiative to leave the marketplace. The reasons may be high listing costs, low trading in the share, a changed ownership structure or an assessment that the company will develop better outside the stock exchange. The company then submits an application, while the marketplace reviews the matter and decides on the last trading day according to its rules.
A forced delisting is instead decided by the marketplace. It can happen if the company no longer meets the listing requirements, seriously breaches the rules or ends up in a situation where continued trading is not considered possible. The exact grounds and process vary between marketplaces.
The difference has great practical significance for the shareholder. A planned voluntary delisting often gives more time to assess the options before the last trading day. A forced delisting, on the other hand, may follow financial or organisational problems, which often creates greater uncertainty about both the value and future trading.
What happens to your shares?
The shares normally remain after the delisting, but they disappear from ordinary stock exchange trading. A holding registered with Euroclear (Euroclear Sweden, the Swedish central securities depository) may in some cases remain in the central securities register and be held in an ordinary custody account. Custody depends on how the company is organised and which unlisted securities the bank or custodian can handle.
The company can also change how ownership is administered after the delisting. If the shares are no longer handled within a central securities register, the ownership details must instead be kept in the company's share register. The shareholder should therefore check the information from the company and the custodian about registration, account transfers and future communication.
The following questions normally need to be clarified after the announcement:
- Which day is the last trading day?
- Is there a public offer or an opportunity to sell before the delisting?
- Can the shares remain in the current custody account?
- Does the holding need to be moved from an ISK to an ordinary custody account?
- How will the company communicate with shareholders after the delisting?
- Is there a marketplace or broker that can handle future sales?
Can the shares remain in an ISK?
Shares that are no longer traded on a regulated market or an MTF platform normally become non-permitted assets in an investment savings account. This applies when the delisting means that the shares are no longer admitted to trading on any marketplace covered by the ISK rules. Continued trading on another approved marketplace can therefore affect the assessment.
As a main rule, a share that was permitted when it was placed in the account may remain until and including the sixtieth day after the end of the quarter in which it became non-permitted. If the share is delisted in May, the deadline therefore falls 60 days after the end of June. After that, the holding normally needs to be moved to an ordinary custody account or another form of custody that can accept the shares.
The bank or custodian usually provides information about the practical handling, but the terms can differ between providers. The bank should therefore be contacted early, especially if the custodian does not offer custody of unlisted shares. A move from an ISK does not mean that the shares are sold, but future dividends and sales will be handled according to the rules for the new form of custody.
How delisted shares are sold
After the last trading day there is no regular order book where buy and sell orders meet continuously. A sale instead requires a buyer who accepts the price and terms. The deal can take place privately, through a broker or on a secondary market that handles shares in the company concerned.
The articles of association and any shareholders' agreements need to be reviewed before the sale. Post-transfer pre-emption clauses (hembud), pre-emption clauses before transfer (förköp) or consent clauses can give the company or other shareholders the right to influence the transfer. Buyer and seller also need to agree on the share class, number, price, payment and the time of the transfer of ownership. The new owner must then be registered in the central securities register or the share register.
Our platform shows buying and selling interest in the companies we work with, but a delisting does not automatically mean that the share becomes available with us. When a share class is represented, the deal follows the same basic process for agreement, payment and registration as other trading in unlisted shares. The absence of a stock market price makes previous trades, current orders and the company's financial development particularly important when assessing the price.
Delisting, takeover or bankruptcy
A delisting does not in itself mean that the company has been taken over or gone bankrupt. In an ordinary delisting, the shareholder continues to own their shares, while the company lives on outside the stock exchange. No automatic compensation is paid simply because trading ends.
A takeover, on the other hand, can be the reason for the delisting. The shareholder may then have received an offer of cash, shares in another company or a combination of both. If a majority owner controls more than nine tenths of the shares, it has the right to redeem the remaining shares. At the same time, the minority shareholders have the right to demand that their shares be redeemed. The delisting can take place before the entire redemption process has been completed.
A bankruptcy is an entirely different situation. The company is then unable to pay its debts and loses control of its assets to the bankruptcy estate. The shareholders come last in line after the company's creditors and often receive no compensation. For shares held outside an ISK, the shares are considered disposed of for tax purposes on the day the company is declared bankrupt, normally at a sale price of zero kronor. The classification of the holding then affects how the loss is handled under the rules for tax on unlisted shares.
Risks after delisting
Liquidity often deteriorates markedly when regular stock exchange trading ends. The number of potential buyers decreases, trades take place less often and the gap between the desired buying and selling price can be large. A value reported in the custody account therefore does not necessarily correspond to the price that can be obtained in an actual sale.
The flow of information can also change. The marketplace's ongoing disclosure requirements end after the delisting, even though the company is still covered by the Swedish Companies Act (aktiebolagslagen), accounting rules and the requirement to file an annual report. Fewer reports and press releases make it harder to follow the company's finances, value the shares and spot new financing needs.
The shareholder therefore needs to follow the company's communication, keep contract notes and make sure that the acquisition cost is documented. Our collected page to explore companies and market content gives a broader picture of the unlisted market, while questions about share classes handled via our platform can be raised by contacting us.
Disclaimer: The content of this article is provided for information purposes only and does not constitute tax advice, legal advice or an individual recommendation. Tax outcomes are affected by applicable law and the specific circumstances of each individual case. Eqvor strives to ensure that the information is accurate and up to date, but makes no express or implied warranties regarding the accuracy, completeness or timeliness of the content. To the extent permitted by applicable law, Eqvor disclaims liability for any damage or loss arising from use of the article or reliance on its content. Anyone considering acting on the information should seek independent advice from the Swedish Tax Agency (Skatteverket) or another qualified adviser.
