Unlisted Shares

What is Unlisted Shares?

Shares of a company classified as unlisted are those not traded on any official stock market such as the NSE or BSE within India. Usually, private companies, startups, or even public companies not yet public issue these shares.

Why Companies have Unlisted Shares?

1. Early-Stage Funding: Startups and private businesses issue unlisted shares to gather funds from investors prior to public release.
2. Ownership Control: Companies can stay under control over their operations by avoiding legal obligations.
3. Strategic Investments: Despite more risks, investors could buy unlisted shares with great growth possibilities.

Characteristics of Unlisted Shares

• Limited Liquidity: One cannot readily purchase or sell them on the open market.
• Higher Risk: Their investments are more hazardous without control and openness.
• Valuation Challenges: Determining the actual value of unlisted shares might provide challenges in valuation.
• Private Agreements: Purchasing and selling usually happen via private agreements, investment businesses, or dedicated trading platforms.

**How to Invest in Unlisted Shares?

1. Private Placements: Companies sell shares straight to investors in private plasters.
2. ESOPs: Employee Stock Options (ESOPs) could be unlisted shares paid for as part of pay.
3. Investment Platforms: A few financial companies and systems focus in trading unlisted shares.

Taxation in India - Unlisted Shares

• More than twenty-four months would define as a long-term investment.
• Long-term capital gains benefit indexation but are taxed at 20%. Short-term gains are added to income of the investor and taxed according to their income slab.