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In this Article, Riya Kothari pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the difference between Listed and Unlisted Company.


According to various sources, listed companies are those which are included and traded on a particular stock exchange. The stock exchanges have various prerequisites that a company must fulfill and continue to fulfill in order to be and stay listed.[1] A private company needs to go public in order to sell its share to the public; once it goes public they register themselves with a stock exchange. The reason companies like to go public is so that they can reduce their debt and have means of financing themselves apart from bank loans. A public company need not always be listed. An unlisted public company is one which is not listed on any stock exchange but can have an unlimited number of shareholders to raise capital for any commercial venture.

A company may not be registered for a number of reasons, such as-

  1. Not large enough to quantify for stock exchange listings.
  2. Very few shareholders listing.
  3. Is not seeking public investors.

What is Listed Company?

A company whose shares are traded on an official stock exchange. It must adhere to the listing requirements of that exchange, which may include how many shares are listed and a minimum earnings level.[2]

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What is Unlisted Company?

These are companies that are not listed on the stock exchange, so they are privately owned. Since they are not on the list, they do not have the opportunity to raise funds. They are becoming capital investors. The trading of the shares is “over the counter”, where the specifications of the agreement can be made in accordance with the requirements of the parties concerned (buyers and sellers); therefore, the exchange of controls is avoided. Unlisted companies have better control over their business operations.

Some questions that come to mind are- Can an unlisted company issue shares on private placement? What is the liability of directors in such a case? What happens if the shares of these companies don’t get listed on any stock exchange? Do the investors of this company have an exit route?[3]

The question of whether an offer of shares or debentures to a few people amounts to a public offering will depend on the facts and circumstances of each case.

The important point to keep in mind is that:

  • When an offer of this type is treated as a public offering, it must comply with all applicable Sebi requirements in the case of an initial public offering.
  • This company would have the obligation to comply with the rules applicable to public companies not listed for the issuance of shares on preferential terms.

Rules of Unlisted Public Companies (preferential allocation), 2003

These rules are applicable to all unlisted public companies with respect to preferred issues (private placement) of shares, fully convertible bonds, partially convertible bonds or any other financial instrument, which would be convertible or exchanged with equity securities. The public unlisted company must make the specified disclosures in accordance with those rules.

Rights of Investor

  1. The potential investor has the right to request from the public company that is not listed on the stock exchange an informative note with the highlights of the proposed private placement, which the company must provide.
  2. Investors should bear in mind that buying shares offered by an unlisted public company via a private placement with the promise of the same listing do not mean that the shares will automatically be included in the list.
  3. Nor does it mean that a stock exchange would be obliged to quote such shares.
  4. An unlisted company must comply with SEBI’s requirements and make the initial public offering (IPO).[4]
  5. Therefore, a mere promise to quote at a later date will depend on several factors. In addition, it is possible that the said company does not commit in writing to the shares listed on any of the recognized stock exchanges. Any investment in equity is still fraught with risks, which vary according to several factors.
  6. The directors of the unlisted public company, who has offered shares in a private placement, incur no additional liability if they have complied with the provisions of the Companies Act during the private placement.
  7. However, if the private placement offer is misleading or if the directors have committed fraud with the investors, they could be considered personally liable. However, investors should keep in mind that even if the directors of the unlisted company had promised that such shares would be listed and that such listing would not occur, even if legal action could be brought against them, it would be difficult to seek effective action.
  8. In case the shares are not on the list, then the investors have no way out and if they intend to sell the shares, they have to wait for the people who sold them those shares.

Key Differences Between Listed and Unlisted Company

Listed and unlisted are the two types of core companies. While profit maximization is the primary goal of both, there are many differences between listed and unlisted companies, depending on the size, structure, and methods of obtaining capital.

    1. The main difference between the listed company and the unlisted company is its ownership; listed companies are owned by many shareholders, while unlisted companies are owned by private investors.[5]
    2. The decisions of the companies are made by the board of directors appointed by the shareholders, which includes the executive and non-executive directors. Board compositions are often specified and governed by various corporate governance requirements.
    3. Decisions must be taken into account in some important decisions. Shareholders are entitled to two forms of return by investing in a listed company. They are:
  • Dividends

It is a sum of money paid by the company to its shareholders on their profits. Some shareholders prefer to collect dividends while others prefer to reinvest the amount of money to which they are entitled in the business, the so-called concept of reinvestment of dividends.

  • Capital gains

Capital gains are profits from the sale of these investments.

It is not mandatory for a company to appear on the list to succeed. Unlike listed companies, disclosure requirements for financial results are not subject to strict rules, so they are flexible and less complicated.[6]

Recent Development

  • In the budget, there was a cut in corporate tax announced which is going to benefit the listed companies.[7]
  • More than 2,700 companies listed on the Bombay Stock Exchange (BSE) are likely to earn revenues from the proposed budget for 2018 of the existing 30%. The analysts have given their approval to the development and hope that the generated surplus will help in the creation of employment. It is believed that a large part of MSMEs will benefit from the cut in the corporate tax rate.
  • “The focus on rural development and the ‘common man’ was largely expected, but the announcement of the new cost formula plus minimum support prices and the introduction of an LTCG tax on equity is a negative surprise. On the other hand, the company’s tax reduction, the commitment to medium-term fiscal consolidation and the continuous spending on infrastructure are positive aspects, “said Sonal Varma, Nomura’s Indian economist in a note.
  • Amar Ambani, partner and head of research at IIFL, believes the move will be beneficial for a number of non-bank financial companies and state finance councils (SFBs) that focus on small business finances.
  • “The budget addresses the needs of the agricultural sector and MSMEs, through which it is intended to achieve an inclusive growth agenda, the formalization of the economy and the creation of employment.”
  • The FM’s promise to reduce the corporate tax rate from 30% to 25% for companies still limited to MSMEs leaves large contributors to wait another year, however, 99% of MSMEs with a turnover of up to 2.5 billion rupees would benefit from the reduction in the rate, “said a note from Deloitte India.


Legally speaking, in the case of an unlisted public company, it is not necessary that such shares be resold to the promoters or the persons from whom they were acquired. These shares can be sold to anyone, but it would normally be difficult to find a buyer for unlisted shares. The legal position is that anyone who buys such shares can have the same transferred on their behalf in the company’s registry without any objection from the company. Of course, the seller and the buyer must respect normal compliance, such as the appropriate transfer document, the publication of transfer stamps, etc. In conclusion, it can only be said that it would be desirable for investors to move away from unknown companies listed on the stock exchange. Unless promoters are personally known, investors must refrain from investing in shares or obligations offered by a publicly-listed company. Otherwise, investors would run the risk of obtaining shares that could be difficult to sell even at a discount.


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[2] Definition of listed company

[3] Risks of investing in an unlisted company (2006, November)

[4] Guidelines for company listing

[5] Difference between listed and unlisted companies (2017, January)

[6] Ibid

[7] Wadhwa, P (2018, February) 2,206 BSE listed companies to gain from the cut in corporate tax



  1. Transfer of shares in a listed company is easy owing to general platform for transfer. However, the shares of unlisted company hold less liquidity; therefore its market value may also be less compared to a listed company.


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