{"id":38883,"date":"2021-12-23T12:02:32","date_gmt":"2021-12-23T06:32:32","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=38883"},"modified":"2022-03-20T08:03:02","modified_gmt":"2022-03-20T02:33:02","slug":"listed-and-unlisted-company","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/listed-and-unlisted-company\/","title":{"rendered":"Listed and Unlisted Company: Key Differences"},"content":{"rendered":"\n<p class=\"has-drop-cap\">This write-up aims at enlisting some key briefing that will help you difference&nbsp; between the listed and unlisted company.<\/p>\n\n\n\n<p>Technically, listed entities are those\nwhich are included on a particular stock exchange. The stock exchanges have\nmany underlying requirements that a company must adhere to in order to stay\nlisted.<\/p>\n\n\n\n<p>A private company generally goes public\nto sell its share to the general public, and once it does that, it registers\nwith a stock exchange. Companies go public to minimize their financial liabilities\nand have means of funding themselves apart from bank loans. A publically-held\nentity need not always be listed. <\/p>\n\n\n\n<p>An unlisted public company is not listed\non any stock exchange but can have countless shareholders to procure capital\nfor any commercial purpose. <\/p>\n\n\n\n<p><strong><em>Following are reasons that usually\nrestrain companies from registering to on a Stock exchange; <\/em><\/strong><\/p>\n\n\n\n<ul><li><em>Having minimal footprint or market presence <\/em><\/li><li><em>Having few<\/em>shareholders listing<\/li><li>There\nis no need for significant investment <\/li><\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/listed-and-unlisted-company\/#What_is_a_Listed_Company\" >What\nis a Listed Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/listed-and-unlisted-company\/#What_is_an_Unlisted_Company\" >What\nis an Unlisted Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/listed-and-unlisted-company\/#Provisions_for_Unlisted_Public_Companies_preferential_allocation_2003\" >Provisions for Unlisted Public Companies (preferential allocation), 2003<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/listed-and-unlisted-company\/#Key_Differences_between_Listed_and_Unlisted_Company\" >Key\nDifferences between Listed and Unlisted Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/listed-and-unlisted-company\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_a_Listed_Company\"><\/span>What\nis a Listed Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A company whose shares are traded on a\nstock exchange is known as a listed company. It must comply with listing\nprerequisites of that exchange, including minimum earning level or how many\nshares are listed. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_an_Unlisted_Company\"><\/span>What\nis an Unlisted Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The unlisted company refers to those\ncompanies that aren&#8217;t listed on any stock exchange, so they are privately\nowned. Since they are unlisted, they do not have the privilege to procure\nfunds. They are becoming capital investors. The share trading is &#8220;over the\ncounter&#8221;, where the agreement&#8217;s specification can be made in pursuant to\nthe requirement of the parties. Thus, the exchange of controls is averted.\nUnlisted entities have more control over business affairs.<\/p>\n\n\n\n<p><strong><em>This brings us down to some fundamental\nquestions, such as <\/em><\/strong><\/p>\n\n\n\n<ul><li>Can\nan unlisted entity issue shares in private placement? <\/li><li>What\nis the director&#8217;s liability in such an event? <\/li><li>What\nif the shares of such companies do not get on any stock exchange? <\/li><li>Do\nthe company&#8217;s investors have an exit route?<\/li><\/ul>\n\n\n\n<p>The question of whether an offer of\ndebentures or shares to a few people amounts to a public offering will depend\non the facts of each case.<\/p>\n\n\n\n<p><strong><em>Here are some noteworthy points in this\nregard: <\/em><\/strong><\/p>\n\n\n\n<ul><li>When\nan offer of such type is regarded as a public offering, it must adhere to Sebi\nguidelines in case of an IPO, i.e. initial public offering.<\/li><li>The\ncompany would have the accountability to fulfil the rules applicable to public\nentities not listed for issuing shares on preferential norms. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Provisions_for_Unlisted_Public_Companies_preferential_allocation_2003\"><\/span>Provisions for Unlisted Public Companies (preferential allocation), 2003<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>These rules covered all unlisted public\ncompanies w.r.t preferred issues (private placement) of shares, partially\nconvertible bonds, fully convertible bonds, or any other financial tool that\nwould be exchanged or converted with equity securities. The unlisted public\ncompany should reveal certain disclosures as per those rules. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Rights\nof Investor<\/h3>\n\n\n\n<ul><li>The investors have the right to request an informative note regarding proposed private placement from the unlisted public entity. <\/li><li>The investor should remember that buying shares <\/li><li>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.<\/li><li>Nor does it imply that any stock exchange would be liable to quote such shares. <\/li><li>An unlisted company should adhere to SEBI&#8217;s guidelines and make the IPO.<\/li><li>Thus, a mere promise to quote at a later stage will depend on various factors. Additionally, the said company is less likely to confer writ confirmation to the share listed on any stock exchanges. Any equity-based investment is still prone to risk, which varies as per several factors. <\/li><li>The directors of the unlisted public entity, who has facilitated shares via a private placement, incur no liability if they have followed the provisions of the Company Act, 2013 during the private placement. <\/li><li>But, if the private placement offering is illicit or if the director is found guilty of committing any felony with the investors, they could be deemed personally accountable. But, an investor should remember that even if the directors of such entity had promised that such shares would be listed &amp; that such listing would not take place, even if legal action could be imposed on them, it would be daunting to seek effective action. <\/li><li>If the shares are unlisted, the investors have no options, and if they seek to sell out the shares, they have to wait for those who sold them those shares. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_Differences_between_Listed_and_Unlisted_Company\"><\/span>Key\nDifferences between Listed and Unlisted Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Listed and unlisted are two different\ncompanies. While profit maximization is the ultimate goal of both, they are\ndifferences between listed and unlisted company, depending on the structure,\nsize, and method of securing capital. The ownership is the primary point of\ndifference between the listed and unlisted company. <\/p>\n\n\n\n<p><strong><em>Where listed entities are owned by many\nshareholders, <\/em><\/strong><\/p>\n\n\n\n<ul><li>unlisted ones are owned by private investors<\/li><li>The decisions are taken by BODs appointed by the shareholders, which includes the executive &amp; non-executive directors. Board structures are often laid and administered by many corporate governance requirements.<\/li><li>Decisions should be considered upfront in some important decisions. Shareholders are entitled to two return&#8217;s forms by investing in a listed company such as <\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Dividends<\/h3>\n\n\n\n<p>It is an amount of money paid to the shareholder by the company against the generated profits. Some <em><strong>shareholders<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Shareholder\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> like to secure dividends while others like to reinvest the money to which they are entitled. Such investments fall under the notion of reinvestment of dividends. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Capital gains<\/h3>\n\n\n\n<p>Capital gains refer to the profit generated from the sale of these investments. It is not a legal compulsion for an entity to appear on the list to prevail. Unlike listed companies, disclosure requisites relating to financial results are not exposed to stringent rules, so they are versatile and less intricate. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>From the legal standpoint, for an unlisted <a href=\"https:\/\/corpbiz.io\/company-registration\"><strong>public company<\/strong><\/a>, such shares don&#8217;t need to be resold to the person from whom they were acquired. These shares can be sold out to anyone, but it would be hard to determine a buyer for unlisted shares. The legal standing is that anyone who secures such shares can have the same transferred on their behalf in the entity&#8217;s registry without any objection. <\/p>\n\n\n\n<p>Indeed, the seller and the buyer must\nfollow fundamental compliance, like the relevant share document and transfer\nstamps&#8217; publication. Thus, it can be concluded that it would be apparent for\ninvestors to remain isolated from unknown companies listed on the stock\nexchange.<\/p>\n\n\n\n<p>Unless promoters are well-known, investors must prevent from investing in shares or guidelines offered by a publicly-listed company. Otherwise, the investor would encounter the risk of securing shares that could be hard to sell out even at a discount. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/corpbiz.io\/learning\/legal-steps-for-the-new-company-incorporation-in-india\/\">Steps for the New Company Incorporation in India \u2013 Complete Procedure <\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This write-up aims at enlisting some key briefing that will help you difference&nbsp; between the listed and unlisted company. Technically, listed entities are those which are included on a particular stock exchange. The stock exchanges have many underlying requirements that a company must adhere to in order to stay listed. A private company generally goes [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":38885,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[2058],"acf":{"service_id":"21"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":29049,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/38883"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=38883"}],"version-history":[{"count":24,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/38883\/revisions"}],"predecessor-version":[{"id":41236,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/38883\/revisions\/41236"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/38885"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=38883"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=38883"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=38883"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}