Listed and unlisted companies refer to the status of a company’s shares concerning a stock exchange. A listed company is one whose shares are traded on a stock exchange. An unlisted company is one whose shares are not traded on a public stock exchange.
What is a Listed Company?
A listed company, also known as a publicly traded company, is one whose shares are traded on a stock exchange. These companies have fulfilled the regulatory requirements imposed by the Securities and Exchange Board of India (SEBI) and other regulatory bodies, and have undergone the process of listing their shares on a recognized stock exchange, such as the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE). The requirements include periodic financial reporting, disclosure of material information, and adherence to corporate governance norms.
Features of Listed Company:
- Publicly Traded Shares: Listed Companies have shares that are traded on a recognized stock exchange, allowing the general public to buy and sell them.
- Regulatory Compliance: They are subject to regulatory requirements imposed by securities regulators and stock exchanges, such as filing periodic financial reports and complying with corporate governance standards.
- Access to Capital: Listed Companies have access to a wider pool of capital through the issuance of equity shares to investors in the primary market and subsequent trading in the secondary market.
- Increased Visibility: Being listed on a stock exchange provides greater visibility and credibility to the company among investors, analysts, and the general public.
- Market Valuation: Listed Companies are subject to market valuation based on the demand and supply dynamics of their shares, which can influence their perceived value and attractiveness to investors.
What is Unlisted Company?
An unlisted company, also referred to as a privately held company, is one whose shares are not traded on a public stock exchange. These companies are typically owned by a smaller group of shareholders, including founders, venture capitalists, or private equity firms. These companies are subject to fewer regulatory requirements compared to listed companies. While they are still governed by company law and other relevant regulations, they have more flexibility in terms of financial reporting and disclosure obligations.
Features of Unlisted Company:
- Private Ownership: Unlisted Companies are privately owned, typically by a smaller group of shareholders, founders, or a single entity, and their shares are not traded on any public stock exchange.
- Less Stringent Regulation: Compared to listed companies, these companies are subject to fewer regulatory requirements and disclosure obligations, which can reduce compliance costs and administrative burden.
- Limited Access to Capital: They may face challenges in accessing capital compared to their listed counterparts, as they rely primarily on private sources of funding such as bank loans, venture capital, or private equity.
- Lower Visibility: Unlisted Companies have lower visibility and public recognition compared to listed companies, which may impact their ability to attract investors and business opportunities.
- Ownership Control: Owners of these companies have greater control over decision-making and corporate governance compared to listed companies, as there are fewer external shareholders and regulatory constraints.
Difference between Listed and Unlisted Company
|
Basis |
Listed Company |
Unlisted Company |
|---|---|---|
|
Meaning |
A listed company is one whose shares are traded on a stock exchange. |
An unlisted company is one whose shares are not traded on a public stock exchange. |
|
Ownership |
In listed companies, shares are sold publicly on stock exchanges, allowing anyone to buy or sell them. |
Unlisted Companies are usually owned by a small group of people or private investors, not open to the public. |
|
Regulation |
Listed Companies are governed by strict regulations of regulatory bodies like SEBI (Securities and Exchange Board of India). |
Unlisted Companies are subject to fewer regulatory requirements compared to listed companies. |
|
Market Liquidity |
Shares in listed companies can be easily traded on the market because they are publicly available. |
Unlisted companies lack market liquidity since their shares are not publicly traded. |
|
Financial Reporting |
Listed Companies have to share their financial information regularly, providing transparency to investors. |
Unlisted Companies have more privacy as they’re not obliged to share detailed financial reports. |
|
Market Valuation |
Market value of listed companies is determined by supply and demand dynamics on the stock exchange. |
Valuation of unlisted companies may be based on internal assessments or negotiations between parties. |
|
Access to Capital |
Listed Companies have easier access to money through stock markets where they can sell more shares. |
Unlisted Companies might find it harder to raise money since they’re not publicly traded. |
|
Transparency |
Listed Companies have to be transparent in their operations and decisions, facing scrutiny from shareholders. |
Unlisted Companies enjoy more privacy in their operations and decisions. |
Listed and Unlisted Company – FAQs
Can unlisted companies go public?
Yes, unlisted companies can go public by conducting an Initial Public Offering (IPO), where they offer shares to the public for trading on stock exchanges.
Are unlisted companies always smaller than listed ones?
Not necessarily. Unlisted companies can vary in size, ranging from small startups to large corporations, depending on their business operations and ownership structure.
Do unlisted companies have shareholders?
Yes, unlisted companies have shareholders, but ownership is typically limited to a small group of individuals, founders, or private investors.
What are the benefits of being an unlisted company?
Unlisted Companies enjoy more privacy in their operations, flexibility in decision-making, and fewer regulatory requirements compared to listed companies.
How can investors purchase shares of unlisted companies?
Investors can buy shares of unlisted companies through Private Placements, Secondary Market Transactions, Venture Capital and Private Equity Funds, Angel Investing Networks, and Direct Investments.