General Understanding

1. What are unlisted shares?

Unlisted shares are shares of a company that are not traded on any stock exchange such as NSE or BSE. They are usually held by promoters, employees, or private investors.

2. How are unlisted shares different from listed shares?

Listed shares trade on public stock exchanges with transparent pricing, while unlisted shares trade privately, often through dealers or directly between parties, with negotiated prices.

3. Can individuals legally buy and sell unlisted shares in India?

Yes. Buying and selling unlisted shares is legal in India, provided the transactions comply with Companies Act, 2013 and SEBI guidelines.

4. Who issues unlisted shares?

Private companies, startups, pre-IPO companies, and even subsidiaries of listed companies may issue unlisted shares.

5. Why do companies remain unlisted instead of going public?

Common reasons include wanting to avoid regulatory compliance costs, retaining control, or waiting for the right market conditions before an IPO.

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Buying & Selling

6. Where can I buy unlisted shares?

They can be purchased through private placements, dealer networks, employee stock option sales (ESOP), or specialized brokers dealing in unlisted equity.

7. What is the minimum investment required?

It depends on the seller and the company. Some deals start from as low as ₹50,000, while others require ₹5 lakh or more.

8. How is the price of unlisted shares determined?

Prices are decided through mutual agreement between buyer and seller, based on factors like the company’s financials, industry outlook, and demand for shares.

9. Do I need a demat account to hold unlisted shares?

Yes, most unlisted shares today are held in demat formwith NSDL or CDSL.

10. Are there any restrictions on transferring unlisted shares?

Yes. Private companies can restrict share transfers in their Articles of Association (AoA), and regulatory approval may be needed in some cases.

11. Can I sell unlisted shares before the company gets listed?

Yes, you can sell to another willing buyer through private transactions.

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Valuation & Returns

12. How do I value unlisted shares?

Valuation can be based on earnings, revenue multiples, book value, or recent private transactions in the company.

13. Are unlisted shares more profitable than listed shares?

They can offer higher returns, especially if the company grows or goes public, but they carry higher risk and less liquidity.

14. What happens to my unlisted shares after the company gets listed?

They automatically become listed shares in your demat account, subject to any lock-in period rules.

15. How are dividends handled for unlisted shares?

Dividends, if declared, are credited directly to your registered bank account.

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Risks & Regulations

16. What are the risks of investing in unlisted shares?

Key risks include low liquidity, lack of price transparency, higher default risk, and regulatory uncertainty.

17. Are unlisted shares regulated by SEBI?

SEBI regulations mainly apply to listed companies. Unlisted shares are governed by the Companies Act and private transaction rules.

18. How do I verify the authenticity of unlisted shares?

Check the company’s filings on MCA (Ministry of Corporate Affairs) and ensure shares are credited in your demat account.

19. Can unlisted shares become worthless?

Yes. If the company shuts down or performs poorly, your shares may lose all value.

20. What is the lock-in period for pre-IPO shares after listing?

For retail investors, 6 months from the listing date (as per SEBI rules).

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Taxation

21. How is capital gains tax calculated on unlisted shares in India?

Short-term (holding ≤ 24 months): Taxed at your income tax slab rate.

Long-term (holding > 24 months): Taxed at 12.5% with indexation.

22. What is the holding period for long-term capital gains in unlisted shares?

More than 24 months.

23. Do I have to pay STT (Securities Transaction Tax) on unlisted shares?

No, STT applies only to listed sharestraded on exchanges.

24. Are there different tax rates for resident and non-resident investors?

Yes. Non-resident investors may facedifferent capital gains rates and TDS, as per Income Tax Act. and DTAA treaties.

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Corporate Actions

25. What happens to unlisted shares in case of a merger or acquisition?

Yes. Non-resident investors may faceThey may be converted into shares of the acquiring company or bought back for cash.

26. Will I be informed about company announcements as a shareholder?

Yes, you are entitled to receive notices, annual reports, and updates from the company.

27. How do bonus issues or rights issues work for unlisted companies?

They work similarly to listed companies — you receive proportionate bonus or rights shares in your demat account.