What happens to my holdings if the share company is suspended?


#1

I bought “X” of company shares my holding value was 60000/- after couple of months it’s got suspended due to some reason’s, I checked with my existing broker regarding this they says that it’s got suspended you can’t able to sell, after an year I heard about that the X company is totally closed & it won’t be available in stock market

So what will happened these type of stocks, what I invested the money will come to me or how it will works


Shares are not listed in NSE or BSE
#2

Hi Prasad,

There is nothing to do if any company gets suspended or de-listed under compulsory de-listing or voluntary de-listing. There are many companies in this list for EG:- BSAL (Bellary Steel & Alloys Limited). Many investors has this shares, even thought the price was @ Re 1, it was trading little frequently. until it was bought by ISPAT ltd once the deal went through BSAL got de-listed from BSE. All the money invested are gone.

The main reason for any company to get suspended is because of NON-COMPLIANCE of listing agreement of the respective exchange/s. One of the reason of Non - Compliance will be of Clause - 49 of listing agreement i.e Corporate governance.

You can find the list of companies in http://www.bseindia.com/corporates/Susp_Comp.aspx?expandable=1


How the suspended shares off-market trading and payments happens?
#3

Prasad, 

Stocks can stop trading on the exchanges for multiple reasons, to list a few: 

  • Amalgamation with another entity, for example Bank of Rajasthan when it merged with ICICI Bank, you would have gotten 1 ICICI Bank share for 4.52 shares of BOR. So BOR stopped trading on the exchanges, but you had shares of ICICI Bank now. 
  • Delisting from the exchanges by offering a share buy back from the public. This is usually done when the promoters have significant stake, and they want to restructure their business. But, you can tender the shares in the buy back, and get your money back, usually such buy backs are always at a premium to the market price. 
  • Finally, the 3rd kind, which I guess you are referring to, the companies with scrupulous management who are suspended from trading on the exchange for non compliance to regulations. If you invest money into such a company, that firstly gets suspended and then closes down, you will have to write it off as a loss, there is nothing you can do about it. Even if the stock was trading on the exchanges, and the company closes down, the value of the share would go to 0.

Hope this helps, 


#4

This is going to long, so have patience! 

Adding to the 3rd point that Nithin made...

When you buy a stock of a company through a stock exchange, you are actually buying the common stock of a company, which is the most riskiest offering of a company in terms of its Capital Structure. Let me attempt to explain..

Assume that company ABC is on the brink of a bankruptcy situation. The companies operations are no longer profitable for the management to run the show. So they decide to wind up. Before winding up they realize that the company has some amount of land, property, inventory and other asset which can be liquidated. Let us assume they liquidate all these assets and recover 10Crs. Now how does the company decide who gets how much of this 10Crs?.

The answer depends on the Capital Structure of the company. 

They will start distributing the 10crs by first paying the those that are there at the the highest level of the capital structure. To help you understand, I've created an image of a typical capital structure of a company.


Notice that the "Senior Secured Debt" holder is at the highest level and hence will first get paid out of the 10crs, after they are paid, the next person to get paid is the Senior Debt holder...so and so forth.

If you see, the Common Equity holder is the last in the Capital Structure...hence he gets paid only after everyone else gets paid. If there is nothing left on the table, obviously he gets paid nothing! This should also explain why equity is considered most risky and debt the most safest! 

Hence as Nithin said, if company declares bankruptcy and they have no money to distribute to shareholders, there is nothing much you can do! 

Afterall, you are taking maximum amount of risk by subscribing to the companies shares. Hence when you invest, make sure you review the balance sheet first

Good luck! 


#5

Hi,

If a company is suspended does not mean their shares are worthless or their value is zero, Its just mean they are not allowed to trade on exchange.

Suspension of a company from trading by exchange might be for several reasons but once the suspended company complies with all regulations suspension will be revoked and the shares will start trading again.

Even some companies like 3A Capital Services, Kajaria Securities and Finance and Abhishek Securities offer services of buying shares of suspended companies.

However in these cases price is arrived at by the buyer so it will be with some discount from company’s actual valuation. The service providing companies will have their in-house research teams to value suspended company and arrive to a particular price.

So to add up if you are holding a share of suspended company it does not mean they are worthless, you can start trading once suspension is revoked or you can sell them to third parties for discounted price.

In the above case of yours if a company is suspended and is closed you investment is worthless, but a suspended company does not mean it will be closed.


How to close demat account when I have share holding because the company is out of market?
#6

Sam is so right.

If the stock is suspended you cannot trade it on the exchange. They are like unlisted stocks

and some unlisted stocks have alot of value like Bennet and Coleman (Times of India)

You have to investigate the fair value of the stock and who is willing to buy it OFF MARKET

from you on a case by case basis.

Sadly in most cases you wont find a buyer because the fraud management have sucked the company dry and made suckers out of the minority shareholders.


#7

We are buying these types of shares ( Delisted Shares / Suspended Shares ) in demat form & physical form also. Kindly contact Vishal 097260 56080


#8

So you mean to say whatever I have invested on the stocks if it’s got de-listed entire money gone case is it? , if this is the case how would I investor come to know which company will be there longer?? Which will be shorter???


#9

that’s the thing, only way to avoid is not to invest in the low trading scrips, liquid scrips, T,F,S group shares.


#10

Hi Nithin, I am having 5 sathyam shares, we know sathyam has been merged with Tech M, do you know how will my sathyam share will be sorted out?


#11

Nice explanation, Does this mean, it is possible that one will not even get the face value returned back?


#12

is it Vishal means…? I have some suspended shares to sell.


#13

Hello Sir kindly need some assistance related to a delisted company stocks. I am holding 10500 shares of Birla Pacific Medspa and 2000 shares of Dhanus Technologies. Both the companies are not trading since long. However in my Demat account the value of these stocks Birla Pacific Medspa is shown Rs. 105000/- and Dhanus Technologies is RS. 20000/- which is not understood. My shares are lying in my Demat account un utilised, please throw some light as what to do with these stocks.


#14

In the 3rd case,
is there any way to empty that share from demat account?
As if I want close the demat account, I would not be able to for this dead share.

I would be stuck, in this case, to close the demat account for such shares.
Is there any way?


#15

Such shares couldn’t be washed out from the demat?
In case, want to close demat?


#16

Ah yeah, you will not be able to close your demat account in such case. The stock will be lying there. Btw, if the stock is of no value, your demat holdings will be of no value. In which case, automatically it will be treated as BSDA account and no AMC charges will apply.


#17

The problem is, I have recently changed my name. I’m unable to update my demat with changed name; as the procedure of axisdirect says I need to close old account and open a new. And for this shares I am unable to. Is it possible to remat the shares? and while transferring them into remat; changing my name to the share certificates at the same time?


#18

I have a similar issue. Having Bought Kingfisher Airlines many years ago, i saw its painful demise and suspension of the trade from Stock Exchange. I should have sosld the stocks while it was still trading, but didnt get the opportunity to do so.

I am now an NRI and want to convert my status with Bank and Demat accounts from Resident Infdian to NRI, however i am advised by my DP that I must get rid of the shares to change my residency status. Having consulted with Karvy Computershare, thry have just put their hands up, and asked me to contact Kingfisher Airlines, who probably dont exist anymore.
I cant gift / donate the shares to anyone without the transfer slips which was sent out to me 15 years ago while opening the Demat account.

So i am stuck with my Demat account, and have to keep paying AMC and cannot convert my account to NRI status.

Any help will be appreciated.


#19

Hi Guru,

While DP regulations don’t explicitly mention that securities need to be sold, DP’s for ease of operations may require you to sell/ transfer these securities to another resident account before they can convert the status.

In the event that the stocks are not trading on the Exchange, another option that you have is to rematerialize them and hold them in physical form as share certificates. Remat of securities can be done even when securities are not traded on the Exchange and the entire process typically takes around 20-25 days if the RTA (Registrar & Transfer Agent) responds and facilitates the remat.

Once the securities have been remat, you can close the demat account. You should get in touch with your DP to understand the process of how the remat is done.


#20

So now what happens to Bellarys share which I bought many years back as it still shows market value zero for this share? Did relisted in trading platform with another name or It will convert automatically in new company name whenever change happens or will start showing value after relisting?