Stricter Rules Introduced to Prevent Unauthorised Transfers of Unlisted Shares

As per the news reports, National Securities Depository Ltd (NSDL) has amended its bye-laws and business rules for unlisted shares, effective August 11, 2025. Private companies can now ask NSDL to restrict the transfer, pledging, or hypothecation of their shares. The depository may approve such restrictions after verifying the company's requests.

Implementation and Responsibility

As per the reports, the revised rules allow companies to enforce limits on share movements before listing. Once restrictions are in place, sales by existing shareholders to retail investors or high-net-worth individuals in the unlisted market can be blocked. The responsibility for these restrictions lies with the company, which will indemnify NSDL against third-party claims.

Context in the Unlisted Market

The changes come amid high activity in the unlisted market, where shares have been trading at varying valuations. In some cases, IPO-bound companies had a large number of public shareholders before listing due to employee stock option plan (ESOP) conversions and secondary sales. The market regulator has clarified that such holdings are not an issue if no public fundraising has occurred.

Impact on Employees and Investors

As per the reports, Employees of private companies who sell vested ESOP shares in the unlisted market may find it more difficult to do so under the new framework. Companies may need alternative arrangements to address employee liquidity. Investors with share transfer rights under existing agreements may also need to adjust their arrangements to reflect the updated rules.

Read more: NSDL IPO Skyrockets from ₹2 to ₹1,300 in 72 Hours, Creating 650-Bagger Returns for SBI, IDBI, and SUUTI!

Conclusion

The updated NSDL framework provides a mechanism for private companies to place formal restrictions on unlisted share transfers, altering how such shares are traded before a public listing.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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