A comprehensive guide to the regulatory framework governing unlisted and pre-IPO share transactions in India. Stay informed, stay compliant.
Unlisted shares are governed by a combination of SEBI regulations, the Companies Act 2013, and Income Tax provisions. While these shares don't trade on exchanges, they are still "securities" under the Securities Contracts (Regulation) Act, 1956 (SCRA).
SEBI actively monitors and regulates the pre-IPO and unlisted share market through various circulars and regulations to protect investor interests and ensure market integrity.
Classifies unlisted shares as "securities," making them subject to SEBI oversight and investor protection provisions.
Governs the transfer of unlisted shares via Form SH-4, requiring physical share certificates or demat form and proper documentation.
Prohibits fraudulent and unfair trade practices in securities markets, applicable to unlisted share transactions and intermediaries.
Unlisted shares held for more than 24 months qualify as long-term capital assets; gains are taxed at 20% with indexation benefit.
These are the most important SEBI regulations that every unlisted share investor must be aware of.
Prevents company insiders from trading pre-IPO and unlisted shares using material non-public information.
Mandates that listed-company subsidiaries disclose significant unlisted share transactions to stock exchanges.
Foreign investors can acquire unlisted shares only through the automatic or government approval routes under FEMA.
TDS at applicable rates applies when unlisted shares are purchased or sold above the specified threshold limits.
Shares of private limited companies with more than 50 shareholders must be held in demat form as per SEBI circular.
Unlisted shares must be valued using the Discounted Cash Flow (DCF) or Net Asset Value (NAV) method for transfers.
SEBI ensures that even unlisted share investors have robust protections and rights under Indian law.
SEBI prohibits any restriction on the transfer of unlisted shares unless explicitly permitted under the Articles of Association.
SEBI's PFUTP Regulations protect investors against market manipulation, misleading statements, and fraudulent activities.
Investors can file complaints on SEBI's SCORES platform for unlisted share disputes and get timely resolution.
All intermediaries must comply with PMLA, ensuring KYC verification protects investors from involvement in illicit transactions.
SEBI mandates approved valuation methods ensuring investors pay or receive a fair, transparent price for unlisted share transactions.
CBDT guidelines provide clear taxation rules, protecting investors from arbitrary tax treatment on short-term and long-term unlisted share gains.
Ensure you tick all these boxes before investing in unlisted shares.
TradeItFinvest is SEBI-registered and ensures every transaction on our platform is fully compliant with applicable regulations.
