Listed vs Unlisted Public Company: Key Differences in India

Quick Summary:

A listed public company has its shares listed on a recognised stock exchange, such as the NSE or BSE, while an unlisted public company does not. Listed companies can attract more investors but have higher compliance requirements and costs. Unlisted companies can raise funds through permitted methods without listing their shares.

Both have a separate legal identity, limited liability and must follow applicable company laws. Both generally follow the corporate income tax rules applicable to them, so listing alone does not decide the tax rate. A listed company may suit businesses seeking wider public investment, while an unlisted public company may suit businesses that do not need stock market listing. The right choice depends on your funding needs, compliance costs and business goals.

Imagine you start a company and want people to invest money in your business. You can list your company's shares on the stock market or keep them unlisted.

This is the main difference between listed and unlisted public companies. Both are public companies, but their shares are treated differently when it comes to stock exchange trading, public disclosures and compliance.

Need help choosing the right company structure? Connect with Startup Movers for company incorporation, compliance support and expert guidance to help you set up and grow your business with confidence.

What Is a Listed Public Company?

A listed public company is a company whose shares are listed on a recognised stock exchange, such as the NSE or BSE. People can buy and sell its shares through the stock market. It can attract many investors but must follow extra rules for sharing business information and meeting legal requirements. Its share price changes based on market demand and other factors.

What Is an Unlisted Public Company?

An unlisted public company is a public company whose shares are not listed on a recognised stock exchange. It can have many shareholders and raise money through permitted methods. Its shares can be transferred according to applicable rules, but they cannot be traded on the stock market like listed shares. It must follow company law but generally has fewer listing-related rules.

Difference Between Listed and Unlisted Public Companies

The main difference is that a listed public company has its shares listed on a recognised stock exchange, while an unlisted public company does not.

Basis	Listed Public Company	Unlisted Public Company
Meaning	A public company with shares listed on a recognised stock exchange.	A public company whose shares are not listed on a recognised stock exchange.
Stock exchange	Its listed shares can be traded on the stock market.	Its shares are not traded through a stock exchange listing.
Buying and selling shares	Investors can generally buy and sell listed shares through the stock market.	Shares can be transferred through permitted transactions outside stock exchange trading.
Fundraising	Can raise funds through permitted public offerings and other methods.	Can raise funds through permitted private placements, rights issues and other methods.
Investor access	Can reach a wider pool of market investors.	Investor access depends on its fundraising methods and network.
Share price	Has a market price that changes during trading.	Does not have a continuously quoted stock exchange price.
Disclosure	Must meet applicable company-law, SEBI and stock exchange disclosure requirements.	Must meet company-law and other applicable disclosure requirements.
Compliance	Generally has additional listing-related compliance duties.	Generally has fewer listing-related duties, but must meet other applicable requirements.
Compliance costs	Usually higher due to additional reporting and listing-related expenses.	Usually lower than for a comparable listed company, depending on its circumstances.
Public scrutiny	Receives greater attention from investors, analysts and the media.	Usually receives less stock-market attention.
Share liquidity	Listed shares are generally easier to trade, depending on market demand.	Finding a buyer may take longer.
Suitability	Often suitable for businesses seeking wider public investment and market visibility.	Often suitable for businesses that want to operate as a public company without listing their shares.

Similarities Between Listed and Unlisted Public Companies

Listed and unlisted public companies have several things in common.

Basis	Similarity
Legal structure	Both are governed by applicable provisions of the Companies Act, 2013.
Separate legal identity	Both have a legal identity separate from their shareholders.
Limited liability	Shareholders' liability is generally limited to the unpaid amount on their shares, subject to applicable law.
Ownership	Both can have multiple shareholders.
Management	Both are managed through a board of directors and authorised officers.
Taxation	Both generally follow the corporate income tax rules applicable to domestic companies.
Annual compliance	Both must meet applicable accounting, audit and annual filing requirements.
Business activities	Both can carry out lawful business activities and earn profits.

Taxation of Listed vs Unlisted Public Companies in India

Listing alone does not decide a company's corporate income tax rate. The applicable tax regime, eligibility, taxable income and other relevant tax rules determine the amount of tax payable.

Basis	Listed Public Company	Unlisted Public Company
Corporate income tax	Generally follows the applicable domestic company tax rules.	Generally follows the applicable domestic company tax rules.
Tax rate	Not automatically higher because its shares are listed.	Not automatically lower because its shares are unlisted.
Tax regime	Depends on the applicable tax regime and the company's eligibility.	Depends on the applicable tax regime and the company's eligibility.
Surcharge and cess	May apply according to the applicable tax rules.	May apply according to the applicable tax rules.
Capital gains	Investors may pay tax when selling shares, depending on the transaction and applicable rules.	Investors may also pay tax when selling shares, depending on the transaction and applicable rules.
Dividends	Dividends received by shareholders are generally taxable in their hands under applicable rules.	Dividends received by shareholders are generally taxable in their hands under applicable rules.
Compliance costs	May have additional listing-related reporting and governance expenses.	Usually has fewer listing-related expenses, depending on its circumstances.

Remember: Company income tax and an investor's tax on share sales are different. An investor's tax treatment may depend on the type of security, holding period, transaction and applicable tax law.

Which Company Should You Choose?

The right choice depends on your funding needs, business goals and willingness to meet additional compliance requirements.

Choose a Listed Public Company If:

You want to attract investment from a wide range of public investors.
You want your shares to be traded on a recognised stock exchange.
You are prepared for additional disclosures and listing-related costs.
You want greater market visibility.

Choose an Unlisted Public Company If:

You want to operate as a public company without listing your shares.
You want to explore permitted fundraising options without stock exchange listing.
You prefer to avoid listing-related obligations while meeting all other applicable legal requirements.
You do not currently need stock exchange trading for your shares.

Tip: Do not choose a company structure based only on taxation. Consider your funding needs, ownership, compliance costs and long-term business goals.

Conclusion

The main difference between listed and unlisted public companies is whether their shares are listed on a recognised stock exchange. Listed companies offer stock market access but generally face additional compliance requirements and costs. Unlisted public companies can operate without listing their shares while following the laws applicable to public companies. Both generally follow the corporate income tax rules that apply to them, so listing alone does not determine the tax rate. Choose the option that best fits your business goals and funding plans.

Frequently Asked Questions (FAQs)

No, a public company does not always have to list its shares on a stock exchange. An unlisted public company can operate without listing its shares, provided it follows the Companies Act, 2013, and other applicable legal requirements. However, specific fundraising methods or regulatory conditions may require listing.

Under the Companies Act, 2013, a public company generally needs at least seven members and three directors. It must also meet applicable incorporation requirements, including having a registered office and filing the required documents with the Registrar of Companies (ROC).

Yes, an unlisted public company can list its shares later if it meets the applicable legal, SEBI and stock exchange requirements. It must complete the required approvals, disclosures and listing process before its shares can be traded on the stock exchange.

Yes, a listed public company may be able to delist its shares if it meets the applicable SEBI delisting regulations and other legal requirements. Delisting is subject to the prescribed process and is not simply a decision to stop trading shares.

Yes, both listed and unlisted public companies are generally required to have their financial statements audited by a qualified statutory auditor under the Companies Act, 2013. Listed companies may also face additional audit, reporting and governance requirements under applicable SEBI regulations.

Disclaimer: This content is published for informational and educational purposes only and should not be considered legal, tax, financial, or professional advice. Please consult a qualified professional before making any financial or business decisions. Startup Movers shall not be liable for any loss or damage arising from reliance on this content.