SEBI Rules for Unlisted Shares in India 2026: Complete Compliance Guide for Investors

By Kanishk Dev Bangia | NISM Series XV Certified Research Analyst

Last Updated: May 2026 | Reg. No: NISM-202300182946

The trading in shares in the organized stock exchanges in India is subject to strict SEBI supervision in terms of monitoring, disclosures, and price discovery. The trading in the unorganized secondary market follows a different approach, which is relatively subdued and opaque and, more importantly, highly risky if you are unaware of these regulations. However, being "less regulated" does not mean it is an "unregulated market"; rather, there are specific regulations that apply to these transactions in terms of share transfer and holding periods post-IPO.

An investor who understands these regulations can avoid legal hassles and recognize any potential issues before investing in such shares. This article covers all aspects of SEBI regulations related to unlisted shares for investors in India.

TL;DR — Regulatory Quick Facts

Are Unlisted Shares Regulated by SEBI?

Yes – but in a manner different from listed stocks. In the case of unlisted shares, SEBI’s jurisdiction operates indirectly through certain triggers such as IPOs, transfer off the market, and disclosures.

There are two parallel laws which form the basis for unlisted shares in India. One is the Companies Act 2013 that regulates the disclosure requirements, procedure for share transfers, shareholders' rights, and other provisions pertaining to companies in India, irrespective of whether they are listed or not. It is only when the companies try to offer their securities to the public, or when there is any violation of investor protection provisions, that SEBI jurisdiction applies.

Whereas, for listed companies that are not public, SEBI & MCA have laid down disclosure norms as per the Companies (Management and Administration) Rules 2014, which require mandatory filings every year, available on the website of MCA. Private Limited companies do not come under most public disclosure laws but are regulated under the Companies Act on transfer & board regulations.

SEBI Disclosure Requirements for Unlisted Companies

The following are required to be filed by unlisted public companies: Annual Return (Form MGT-7) and Annual Accounts (Form AOC-4), annually, at the office of the Ministry of Corporate Affairs. Both are available to the public through the website MCA21.

Under the Companies Act 2013 and MCA Rules, unlisted public companies are required to maintain and disclose the following on a statutory schedule:

Off-Market Transfer Rules — How Unlisted Shares Legally Change Hands

Unlisted shares are required to be held and transferred in dematerialized form, especially in cases where the company is an unlisted public company and has more than 50 shareholders (per the MCA circular requirement). There have been no physical share certificates issued for any new issue. Transfers of shares take place only by means of DIS slip.

Step-by-step off-market transfer process

1. Dematerialize the shares: Seller must have the shares under his demat account where the Demat Account Provider must be CDSL/NSDL registered Depository Participant. Firstly, physical certificates will be required to be dematerialized from the issuing company's RTA only then only transfer will take place.
2. Generate a Delivery Instruction Slip (DIS): Seller will send DIS to the DP directing to transfer specified number of shares (with ISIN, quantity, DP ID and Client ID of the counter party) to the buyer’s demat account.
3. Credit the buyer’s account: Within T+1 days of Off-Market trading (T+1 being working day) the credit will appear in the buyer’s account. It is important for both sides to keep DIS acknowledgment.
4. Stamp duty: As per Indian Stamp Act, 2020 amendment, Off-market transfer of Unlisted Securities will be taxable at 0.015% of the transaction value charged to buyer only.

Lock-In Period Rules — What Pre-IPO Investors Must Know

ESOP owners, pay attention: ESOPs of unlisted companies are regulated by the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations 2021 if the company is listed. Otherwise, Companies Act 2013 regulates unlisted firms' ESOPs. The lock-in period, vesting, and sale rights will be found in your company’s ESOP policy document, not in a general SEBI regulation. Look at your ESOP policy document.

Violation of lock-in period penalty: An ESOP owner’s premature sale of the restricted shares will violate the SEBI ICDR Regulations and attract punishment, including mandatory buyback of the sold shares. SEBI has the authority to compel recovery of the proceeds from such transactions under Section 11B of the SEBI Act 1992.

Buying Unlisted Shares — Compliance Checklist for Investors

1. Confirm registration of intermediary: Verify whether the dealer dealing in your behalf is registered with SEBI as Research Analyst (RA) through sebi.gov.in → Intermediary/Market Infrastructure Institutions → RA Registration. If not, the unregistered intermediary giving investment advice on payment basis contravenes SEBI (RA) Regulations 2014.
2. Verify demat credit and not mere assurance: Insist on demat credit within the stipulated time period (usually 3-7 working days). Never release money before getting DIS acknowledgement number and receiving confirmation of demat account credit.
3. KYC completion: The KYC process of your demat account (PAN + Aadhaar linking) needs to be up-to-date. From January 2024 onwards, SEBI will implement a two-factor authentication process for demat accounts. Any intermediary that goes ahead without obtaining your PAN number is in breach of regulations.
4. Only pay through banking route: The payment for the purchase of any unlisted shares has to be done through NEFT, RTGS, or a crossed cheque drawn in favor of the seller. It is not permissible to conduct any cash transaction in securities according to the Prevention of Money Laundering Act 2002 (PMLA). UPI payment to personal mobile phone number (not an account with the business) will have no recourse.
5. Get the buy/sale agreement signed: Any signed piece of paper stating the name of the company, number of shares to be bought, rate per share, date of transaction, and the name of the seller is important to ascertain the cost of acquisition.
6. Check the status of ISIN on MCA/NSDL/CDSL: Each dematerialized unlisted share has a valid ISIN that has to be verified online through the NSDL or CDSL website.

Tax Implications for Unlisted Shares — 2026 Framework

Unlisted shares held for more than 24 months qualify for Long-Term Capital Gains (LTCG) tax at 12.5% without indexation — a rate revised downward by the Finance Act 2024. Gains on shares held for 24 months or less are treated as Short-Term Capital Gains (STCG) and taxed at the investor's applicable income tax slab rate.

Surcharge note: High-income investors (taxable income above ₹50 lakh) face a surcharge of 10–25% on top of the base tax rate, which can push the effective LTCG rate above 15%. Consult a chartered accountant before structuring large unlisted share transactions.

SEBI's Stance on Pre-IPO Allocation Schemes

SEBI makes a clear distinction between the regulated collective investment schemes (AIFs, Category I-III) that pool funds for investing in pre-IPO opportunities and the unregistered "dealer network," which sells the shares through informal channels. The latter do not enjoy any legal investor protection measures. Guarantee allotment is one such scam scheme.

Regulated vs. unregulated pre-IPO access

Recent SEBI Updates Affecting the Unlisted Market (2024–2026)

SEBI issued several circulars between 2024 and 2025 tightening pre-IPO lock-ins, revising DRHP confidentiality rules, and expanding disclosure obligations for unlisted public companies. These changes directly affect how — and when — pre-IPO investors can exit.

How to File a Complaint Against an Unlisted Share Dealer

1. Join SEBI SCORES 2.0: Register yourself by providing your PAN number and email ID along with your complaint by mentioning the intermediary’s name, registration number (if available), transactions, and nature of the complaint.
2. Collect your evidence: Copy of purchase agreement or WhatsApp/email correspondence, proof of bank transfer, confirmation of DIS acknowledgment (or lack thereof), demat account statement indicating non-delivery, and promotional materials received.
3. SEBI SCORES 2.0 timeline: As per SEBI SCORES 2.0 regulations, an initial response must be provided within 21 days. In case the intermediary does not provide a response or the response provided is unsatisfactory, SEBI’s Enforcement Directorate may assume jurisdiction. Monitor the progress through the SCORES portal.
4. SMART ODR (Online Dispute Resolution): For complaints worth less than ₹50 lakh, SEBI’s comprehensive SMART ODR system (smartodr.in) offers an expedited mediation/conciliation process prior to initiating any regulatory measures. Mandatory step for securities disputes starting April 2024.
5. Proceed to consumer court or civil suit in case of an unregistered dealer: In case the stock dealer is unregistered, SCORES forum jurisdiction does not lie. Lodge a complaint before the District Commission (under the Consumer Protection Act 2019) or State Commission for amounts up to ₹50 lakhs or ₹50 lakhs to ₹2 crore.

Frequently Asked Questions

1. Is there any regulation by SEBI regarding unlisted shares?

Yes, but only indirectly and selectively. SEBI regulates the intermediaries (stock brokers, research analysts) involved in unlisted shares trading and imposes direct regulations whenever a company applies for an IPO (SEBI ICDR Regulations 2018). The Companies Act, 2013, governs corporate level disclosures and share transfer requirements for all unlisted companies. The day-to-day price discovery in the unlisted market is not regulated by SEBI – it is an over-the-counter (OTC) market.

2. What is the lock-in period for pre-IPO shares?

According to the ICDR Regulations, under SEBI (as amended in 2024): non-promoter pre-IPO shareholders have a 6-month lock-in starting from the date of listing. Promoters have an 18-month lock-in on their minimum promoter contribution (20% of post-issue capital) and a 6-month lock-in on any additional promoters' shares above that requirement. Anchor investors have a split lock-in of 30 days on 50% of the shares allotted and 90 days on the other 50%.

3. How do you pay taxes for unlisted shares in India?

After transfer of stocks dated later than July 23, 2024 (Finance Act 2024), Long Term Capital Gain Tax on unlisted shares will be taxed @12.5%, without any indexing. Short Term Capital Gain Tax (stock sold within 24 months) will be charged based on your applicable income slab rate. The dividends received from an unlisted firm will attract tax at slab rates, with TDS deducted by the company if the amount is above ₹5,000 at 10%. High income surcharge rates apply over and above this basic rate.

4. Can I lodge an SEBI complaint against the stock dealer of unlisted shares?

In case he is registered with SEBI as Research Analyst / Stockbroker /Investment adviser, yes, you may lodge a complaint online on the SCORES portal (scores.sebi.gov.in) or dispute settlement through SMART ODR portal (smartodr.in). In case he is not registered, you cannot use SCORES; your redress is only through the Consumer Protection Act 2019.

5. Is purchasing unlisted shares legal in India?

Completely legal. Off-market demat purchase of unlisted company shares is an activity covered by the provisions of the Companies Act, 2013, and SEBI. Things to take care of: demat transfer only (not physical for publicly held companies), payment by bank transfer only (no cash), KYC compliance, and stamp duty payment at 0.015% of the transaction amount.

6. What are SEBI ICDR Regulations?

SEBI Issue of Capital and Disclosure Requirements Regulations 2018 popularly referred to as ICDR Regulations define the rules related to capital issues made by any company to the general public. The regulations include requirements for IPOs, DRHP disclosures, pricing, allotment, lock-ins, etc. Relevant ICDR Regulations for unlisted shareholders: lock-in provisions, i.e., Regulations 16-17 and DRHP filing process.

Disclaimer:

This is written for educational and informational purposes only. Nothing here constitutes investment advice or a recommendation to buy or sell securities. All data is sourced from publicly available information. Investments in securities markets are subject to market risks — please read all offer documents carefully before investing.