When retail investors and traders look for new investment options, they often come across two common investment terms, i.e., ‘listed company’ and ‘unlisted company’. However, many people do not know what they are or the difference between them. Before investing in any company, understanding these two terms is quite important.
A listed company is basically a public company whose shares are listed on an Indian stock exchange, such as NSE, BSE or MSE, or international stock exchange, such as the US-based NASDAQ or UK-based London Stock Exchange. An unlisted company is a company whose shares are not listed on any stock exchange. Such a company is a privately-held company that has certain restrictions on transfer of shares.
Compared to shares of listed companies, shares of unlisted companies are a lot harder to buy and sell. If you are planning to invest in a company, we recommend reading this article to understand the difference between listed and unlisted company in detail.
A listed company, a.k.a publicly traded company, is a company whose shares are listed and traded on a stock exchange. In India, a company can become listed only after fulfilling regulatory requirements set forth by India’s securities market regulator Securities and Exchange Board of India (SEBI). The company must also meet the requirements of stock exchange where it wants to list its shares.
The listing process involves several important steps, such as ensuring that company is a public limited company, appointing a merchant banker and filing Draft Red Herring Prospectus (DRHP) with SEBI and concerned stock exchange along with completing other required formalities.
After listing is done, a company is required to strictly follow certain rules. The rules include submitting financial reports periodically, disclosing important information and complying with corporate governance norms. Listing also makes a company more visible to investors and the public. This increased visibility can be really helpful for building reputation and credibility of a company. The general public can easily buy and sell shares of a listed company online via stock trading apps like Zerodha, Upstox Groww to name a few.
Now that you have understood what a listed company is, you can easily guess that an unlisted company is its opposite. To explain it in a simple way, an unlisted company is a company whose shares are not listed on a stock exchange. It is also known as a privately held company because its ownership is restricted to a small no. of shareholders.
Compared to the listed companies, the unlisted companies have fewer compliance requirements to fulfill. This means that they have less administrative and compliance costs burden as well. The visibility of an unlisted company is lower than that of a listed company. A listed company is always in news for getting new business, for releasing quarterly earnings or for expanding operations but an unlisted company’s matters/activities are much more private.
Due to less visibility, it can be more difficult for an unlisted company to attract new business opportunities and investors. Such a company may have to make extra efforts to stand out in market. For this very reason, many unlisted companies decide to take the path of getting listed on a stock exchange.
Once you go through the table below, you will be able to understand the difference between listed company and unlisted company clearly:-
|
Parameter |
Listed Company |
Unlisted Company |
|
What Is It? |
Listed companies refer to companies whose shares are listed and traded on a recognized stock exchange. |
Unlisted companies are those companies whose shares are not listed or traded on a recognized stock exchange. |
|
Also Known As |
A listed company is also known as a Publicly-Traded Company. |
An unlisted company is also known as a Privately-Held Company. |
|
Regulated by |
It is primarily regulated by Securities and Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA) and the Stock Exchange where it is listed. |
It is not regulated by SEBI or any stock exchange. However, it is regulated by MCA. All the companies, regardless of whether they’re listed or unlisted, are regulated by MCA. |
|
Transferability of Shares |
A listed company’s shares are freely transferable under the Companies Act, 2013. |
The transferability of shares of an Unlisted Company is restricted. |
|
Maximum No. of Shareholders Allowed |
A listed company has no upper limit regarding the maximum no. of shareholders. |
An unlisted company registered as a pvt ltd company usually has up to 200 shareholders, not more. |
|
Control Over Decision-Making |
Company owners have diluted/shared control over decision-making and also corporate governance. |
Company owners have greater control over decision-making and also corporate governance. |
|
Funding Access |
For publicly held companies, access to funding is easier. This is because their shares are sold on the stock market. |
For privately held companies, access to funding is more challenging because their shares are not sold on the stock market. |
|
Transparency & Privacy |
The affairs, activities and operations of listed companies are more transparent. Therefore, such companies enjoy less privacy. |
The affairs, activities and operations of unlisted companies are usually more private than transparent. Many things of such companies do not get revealed unless required by law. |
|
Eligibility for DPIIT Startup India recognition |
Since listed companies are registered as public limited companies, they are ineligible for DPIIT Startup recognition. |
Unlisted companies registered as private limited companies are eligible for DPIIT Startup recognition. However, such companies must meet all the eligibility requirements, not just the company structure requirement. |
|
Example |
Examples include Jio Platforms, Lemon Tree Hotels Limited and HDFC Bank Ltd. |
Examples include Parle Biscuits Private Limited, Marriott Hotels India Private Limited and Google India Private Limited. |
Learn More:- How to File a Draft Red Herring Prospectus with SEBI?
Listed companies are those whose shares are traded on a stock exchange, such as NSE, MSE or BSE. On the contrary, unlisted companies are those whose shares are not traded on any recognised public stock exchange. SEBI and stock exchanges primarily regulate listed companies in India and matters/affairs related to securities market. However, MCA regulates all companies in India, regardless of whether they are listed or unlisted, under the Companies Act, 2013.
After going through this blog post, we’re pretty sure you have understood all the major differences between listed vs unlisted companies. In case you need assistance in turning your unlisted company into a listed one, you can get in touch with our IPO consultants at Registrationwala.
Q1. Can a private limited company be a listed company?
A. No. Only a public limited company can be listed on a stock exchange. If you own a private limited company and want to get it listed, you must first convert it into a public limited company by following the process prescribed under the Companies Act, 2013 and rules made thereunder.
Q2. How can a company get listed on a stock exchange?
A. The most common way through which a company can get listed on a stock exchange is through initial public offering (IPO). To know more, you can connect with our team at Registrationwala.
Q3. Are the affairs/matters of unlisted companies more private than listed companies?
A. Yes, definitely. The affairs/matters of listed companies are usually more visible to public whereas those of unlisted companies are comparatively more private.
Q4. Are listed companies eligible for DPIIT Startup Recognition?
A. No. Listed companies are ineligible for DPIIT Startup Recognition. This is because such companies are registered as Public Limited Companies under the Companies Act 2013. Only companies registered as Private Limited Companies under the Act or other eligible business entities such as LLPs under LLP Act 2008, Registered Partnership Firms under Indian Partnership Act 1932 or Cooperative Societies are eligible for the said recognition.
Q5. What is the maximum no. of shareholders allowed in a publicly traded company?
A. There’s no upper limit on the maximum no. of shareholders allowed in a publicly traded company.
Q6. Is it easier for publicly traded companies to access funding compared to privately held companies?
A. Yes. The publicly traded companies have easier access to funding because they can sell their shares in the share market. The privately held companies do not have access to the share market due to which access to funding is often more challenging for them. However, they can still benefit from government initiatives and schemes like Startup India Initiative, Pradhan Mantri Mudra Yojana, etc.
Q7. Is Reliance Industries Limited a listed company?
A. Yes, it is. It is listed on both National Stock Exchange and Bombay Stock Exchange.
Q8. Which company is the largest listed company in the world?
A. By market capitalization, the largest listed company in the world is NVIDIA, a US-based MNC.
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, finance and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
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