Lock-In Period Rules for Unlisted Shares 2026: Pre-IPO vs Post-IPO Complete Guide
Reviewed by Kanishk Dev Bangia | NISM Series XV Certified Research Analyst
Last Updated: May 2026 | Reg. No: NISM-202300182946
And here is the pitfall into which many pre-IPO buyers fall: they buy their unlisted stock weeks before the IPO, they see their company go public with a 40% premium valuation, and then find out that they can’t even sell one share for the next six months. They have gone from being euphoric to helpless. Lock-in periods, not market dynamics, are the barrier standing between them and their gains.
Unlisted and pre-IPO share lock-ins in India are regulated under SEBI’s Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2018, with major amendments made in 2021 and 2022. There is a vast difference based on your status as a promoter, a pre-IPO secondary buyer, an anchor investor, an ESOP holder, or an IPO retail allottee.
It is critical that you know your lock-in dates before buying your shares. This is precisely when you can sell your unlisted and pre-IPO shares in 2026, broken down by SEBI category and including lock-in period lengths for each class of shareholder, how dematerialization applies, and an exit strategy framework.
See also: How to Buy Unlisted Shares in India.
What is a Lock-In Period?
Lock-in period is a compulsory period during which the investor cannot sell, transfer or encumber his shares even though the shares have been listed in the stock exchange. Lock-in periods are statutory in nature and not voluntary. It is implemented by blocking the demat shares from any transfer instructions by the depository NSDL/CDL.
SEBI had made regulations of lock-ins to address the following two abuses in the market:
• Dumping after listing: Selling of shares in large quantities by pre-IPO shareholders or promoters after listing of the company and driving down the price of the stock, leaving retail investors who purchased the stock through IPO at a loss.
• Flipping of IPO: Converting the IPO to a speculation opportunity by buying low and selling high in a very short span of time.
• SEBI ICDR Regulations 2018: Prescribing the minimum statutory regulations applicable to all IPOs.
• The DRHP of the company: Additional regulations imposed by the company on its shareholders including promoters and institutional investors.
In case of investment in non-listed shares, the lock-in regulations apply only after the IPO.
Pre-IPO Investor Lock-In Rules (Post-Listing)
However, the vast majority of investors in secondary markets prior to going public have a lock-in period of six months starting from the date of listing of the shares in IPOs according to SEBI ICDR Regulations 2018, Regulation 17.
It is the one rule which trips up investors more than anything else. Even though you might be holding the stock for 18 months in the unlisted market, the lock-in period for SEBI begins right from the date of listing in IPOs.
Key features according to SEBI ICDR (2021 amendment):
• 6 months of lock-in period after the listing for shares issued to pre-IPO investors (excluding promoters) who have acquired the shares during the year preceding the IPO.
• Where the shares have been issued prior to the year preceding the opening of the IPO, the pre-IPO investors shall not be under any post-listing lock-in obligations – a major amendment by SEBI in 2021.
• Shares of convertible securities (compulsorily convertible preference shares, CCDs) issued during the year preceding the IPO will be subject to a lock-in period of 6 months after the listing of the company.
This 1-year exemption is why sophisticated pre-IPO investors deliberately enter positions 14–18 months before an expected IPO — ensuring they fall outside the lock-in window entirely.
Promoter Lock-In Rules
Of all, promoters have to observe the harshest lock-in regulations as per SEBI's guidelines – ranging between 18 months and 3 years based on the kind of holdings under Regulations 16 and 17 of SEBI ICDR Regulations 2018 (amended till June 2021).
The rationale behind the new regulations of SEBI 2021 with regard to promoter lock-in from a harsher previous regime was:
• Promoter's Contribution Lock-In: Minimum promoter contribution (20% of post-issue equity) will be locked-in for 18 months after the date of allotment in the IPO. This has been lowered from 3 years in the SEBI 2021 amendment – a big liberalisation.
• Excess Promoter Shareholding: Shares beyond minimum contribution of promoters will be locked-in for 6 months starting from the date of allotment.
• Pre-IPO Promoter Shareholding (held for more than one year before the IPO): They are subject to a lock-in of 18 months provided they form a part of promoter contribution. If they do not constitute part of contribution but are held for more than one year, they shall be locked-in for 6 months.
• Preferential Allotment by Promoters within one year of IPO: They are subject to 3 years' lock-in period – the toughest category.
Anchor Investor Lock-In Rules
Anchor Investors: Qualified Institutional Buyers allocated the shares one day before the IPO opening day have a staged, two tranche lock-in of 30 days for 50% allocation and 90 days for the other 50% as per SEBI ICDR regulations.
The idea behind the staged lock-in period was to avoid a mass exodus by anchors on one particular unlock day. The actual scenario is as follows:
• 50% allocation to anchor investors: Unlocked after 30 days of IPO allotment date.
• Remaining 50% allocation to anchor investors: Unlocked after 90 days of IPO allotment date.
• Anchor investors receive their shares from the IPO process and not by the secondary market like pre-IPO investors.
Therefore, monitoring the behavior of anchor investors during lock-in unlock days is very important for retail investors in the secondary market, as a significant sell-off by anchors on Day 30 and Day 90 can cause short-term downward pressure on the listed stock and impact the unlisted shares of that company.
ESOP Holder Lock-In
ESOPs granted in IPO-bound companies have an additional layer of lock-ins: the usual one-year cliff period and an additional company lock-in period after the IPO period for 6 to 12 months from the date of issuance based on the company's ESOP Policy and SEBI employee benefit norms.
ESOPs, however, are not subject to SEBI ICDR lock-in rules as pre-IPO investor shares. Rather:
• Pre-exercise ESOP options: Not transferable. Employee needs to exercise (pay exercise price) to convert options into shares to be eligible for transfer.
• Exercised ESOP shares before IPO: After exercise and conversion into shares, they may be liable for 6-month pre-IPO lock-in after listing if exercised less than one year before the IPO.
• Post-IPO ESOP grants: Purely determined by the company's ESOP plan which is either a 1-year cliff period followed by 3–4 years of graded vesting periods. No SEBI lock-in provisions apply.
Tax consideration: Exercising ESOPs results in tax on perquisites equal to difference between fair market value and exercise price as salary income at the point of exercise itself regardless of the fact that shares cannot be sold on account of lock-in periods.
How Lock-In is Tracked and Enforced
The automatic enforcement of lock-in takes place at the depository level by the imposition of a ‘blocked’ or ‘locked-in’ status on certain quantities of ISINs belonging to the investors. There is no need for any manual operation by the investor for enforcing the lock-in.
The mechanics work as follows:
- ISIN-level blocking: The lock-in indicator will be set for precisely the number of shares that are subject to restriction. Other shares of the same company (if any) will not face any restrictions.
- Rejection of transfer through DIS: If any attempt is made to transfer, sell, or mortgage the locked-in shares, then such instructions will be automatically rejected by the depository system.
- Automatic release: As soon as the lock-in period expires, the shares will automatically get released from the lock-in requirement. Neither the investor nor the company needs to take any action.
- Disclosure in DRHP: The details of lock-in period, number of shares subject to the lock-in, name of the investor (in case of promoters), and the lock-in expiration date need to be included in the company’s DRHP.
Lock-In Differences for Different Investor Categories
The table below provides a one-view summary of all lock-in durations, consolidated from SEBI ICDR Regulations 2018 (as amended 2021) and standard market practice:
Selling Unlisted Shares Before Listing — Lock-In Considerations
There is no SEBI lock-in period regarding the transfer of unlisted shares in the secondary market (before the IPO). You can buy and sell unlisted shares even before the IPO, except for one condition. The documents governing the company may have clauses that prohibit such transactions.
Prior to selling your shares in unlisted firms, you need to check the following documentation:
- Articles of Association (AoA): Can have a provision for pre-emption rights or restrictions on transfers. Most private firms have a provision for the right of first refusal (ROFR), wherein you need to offer your shares to other stockholders before going to any outside buyer.
- Shareholder Agreement (SHA): Can be part of the agreements signed by business founders and institutional investors (VCs/PEs). It is contractual, not statutory, and violation of the terms in SHA comes with a heavy price tag.
- Right of First Refusal (ROFR): Included in start-up stock ownership agreements. Failure to adhere to ROFR provisions could render a sale agreement invalid.
At Unlisted Axis, we ensure that all of these requirements are adhered to prior to the sale of your shares. Both buyers and sellers of unlisted stocks need to comply with these before proceeding with the transactions.
How to Plan Your Exit Around Lock-In
It’s best to plan your IPO exit before buying and not after. If there’s a six-month lock-in, that doesn’t mean you can’t prepare. In fact, you’ve got six months to determine your price targets, assess newsflow, and plan for an appropriate staggered exit.
- Determine the unlock date immediately: Listing date + 6 months = earliest exit date. Note this date and mark it on your calendar two months in advance.
- Price targets are determined before listing: Figure out your lowest acceptable exit price based on fundamentals (PE ratio, other companies in the sector) before listing.
- Don’t panic-sell during unlock period: Stock prices tend to experience some downward pressure due to the number of sellers at unlock period dates. Unless fundamentals have changed, hold off for another 2-4 weeks after unlocking.
- Stagger your exit over 2–3 months: Selling in tranches reduces both price impact and tax concentration in a single financial year. Large block sales on thinly traded mid/small-cap stocks can move the price against you.
- Watch for secondary lock-ins: Some companies include voluntary lock-in commitments in the DRHP (beyond SEBI minimums). Check your specific DRHP before assuming the 6-month minimum applies to your tranche.
Common Lock-In Mistakes to Avoid
These are the five most common lock-in errors we see from pre-IPO investors in the unlisted shares market:
- Buying pre-IPO without reviewing the DRHP: The DRHP has lock-in conditions mentioned for each type. Lack of review is not an excuse; you will be locked in regardless.
- Thinking 'pre-IPO buyer = no lock-in': The biggest trap out there. Secondary buyers in the pre-IPO stage get 6 months post-listing lock-in, unless their tenure exceeds 1 year prior to the IPO launch.
- Guaranteeing buyers a post-listing escape route: By selling unlisted securities to someone who expects 'exit on listing day', you might be misleading them and putting yourself at risk legally.
- Mixing up promoter and investor lock-ins: Promoters get 18-36 months. Investors receive 6 months. Anchor investors get 30/90 days. They are not one and the same.
- Failing to consider company-specific SHA provisions during the unlisted period: SEBI lock-in applies post-IPO only. Until then, the SHA and AoA reign supreme — and are sometimes stricter than SEBI requirements.
Frequently Asked Questions
Q: What is the lock-in for pre-IPO shares in 2026?
A: According to SEBI ICDR Regulations 2018 (as amended 2021), investors in secondary market pre-IPO shares have a lock-in of 6 months from the listing date of the IPO, on condition that they purchased these shares within 1 year of the IPO listing date. Shares which were purchased over 1 year prior to the IPO listing date will not have any lock-in after listing. This is a new feature added by SEBI in April 2021.
Q: Am I free to sell my unlisted shares at any time?
A: Unlike listed stock, unlisted (pre-IPO) shares do not have any mandatory SEBI lock-in, and you are free to sell your shares even before the company lists. But it is possible that the company’s Articles of Association, Shareholders' Agreement or Right of First Refusal terms prevent such transactions.
Q: Explain anchor investor lock-in?
A: The anchor investors (QIBs who were allocated stocks on the day preceding the opening of the IPO window) have a lock-in period of two phases, where 50% of the allotted stock by the company to anchor investors is under lock-in for 30 days from the date of allotment, and the rest 50% is under lock-in for 90 days. This ensures no massive anchor exit in case of a listing.
Q: Explain the promoter lock-in period?
A: According to SEBI ICDR (Amendment) Regulations 2021: Promoter Contribution Stocks (minimum of 20% of post-issue equity) are under lock-in for 18 months from the date of allotment (previously 3 years before the amendment of 2021), whereas any excess promoter contribution is under lock-in for 6 months only.
Q: Can I transfer my unlisted shares to my family members in the lock-in period?
A: During the pre-IPO stage, the company's Articles of Association (AoA) and Shareholders Agreement (SHA) may permit transfer of shares to immediate family members without invoking the right of first refusal (ROFR). Post-listing, SEBI ICDR allows transfer of locked-in shares to legal heir/ immediate family without breaching the lock-in period – the transferee takes forward the balance lock-in period. Refer to the applicable provisions of DRHP and take legal advice.
Q: What is the lock-in for ESOP shares?
A: ESOPs have two types of lock-ins: (a) The lock-in from the company's vesting policy, typically for 1-year cliff followed by 3-4 years graduated vesting, which tells you at what time you are allowed to exercise your option; and (b) if you have exercised your ESOP and have taken equity within 1 year of the IPO, there is a 6-month additional SEBI lock-in post listing. Post-IPO ESOPs are covered only under the company’s ESOP policy.
Question: What occurs after the lock-in period ends?
Answer: The release from the lock-in period is automatic; the depository (NSDL/CDSL) will unblock the securities once the lock-in period ends. No action is needed from your side. From the next working day onwards, you can freely sell the shares. But selling the shares on the same day that the lock-in period ends may be subjected to downward price pressure, especially if other shareholders are doing the same.
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.
