pri Concept of Private Listed Company Concept of Private Listed Company

Article contains Definitions of Private listed Company, Listed Company, Securities and Private Company. Article interprets term ‘marketable securities’ specified in SCRA, 1956 and explains Marketability of securities issued by a private limited company. Article further explains Whether SEBI has the power to regulate unlisted companies if they are issuing securities?

Article further explains with respect to private placement on Prohibition on acceptance of deposits from public, Section 42 -Offer or invitation for subscription of securities on private placement, SEBI- LODR Regulations, Eligibility criteria for listing on the WDM segment of NSE, Listing of shares, listing of debentures, Additional compliances and IND AS Applicability.


Private listed Company Not given directly in any Act for the time being in force
Listed Company Section 2(52) –Companies Act, 2013: ―listed company‖means a company which has any of its securities listed on any recognized stock exchange;


Section 2(81)-Companies Act, 2013: ―securities‖means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956;

Section 2(h)-Securities Contract Regulation Act, 1956:

“securities” include—

  • shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;
  • derivative;
  • units or any other instrument issued by any collective investment scheme to the investors in such schemes;
  • security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
  • units or any other such instrument issued to the investors under any mutual fund scheme;
  • Government securities;
  • such other instruments as may be declared by the Central Government to be securities; and
  • rights or interest in securities;
Private Company


Section 2(68) –Companies Act, 2013

“private company” means a company having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital as may be prescribed,and which by its articles,-

i. restricts the right to transfer its shares;

ii. except in case of One Person Company, limits the number of its members to two hundred:

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:

Provided further that—

Provided further that—

(A) persons who are in the employment of the company; and

(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and

(iii) prohibits any invitation to the public to subscribe for any securities of the company;

Interpretation of “marketable securities” specified in SCRA, 1956

Case Law Bhagwati Developers Pvt. Ltd. v. Peerless General Finance and Investment Company Ltd. and Anr had stated as follows [the Hon’ble Supreme Court in July 2013]:

As is evident from the dictionary meaning set out above, the expression “marketable” has been equated with the word saleable. In other words, whatever is capable of being bought and sold in a market is marketable. The size of the market is of no consequence. In other words, the number of persons willing to purchase such shares would not be decisive. One cannot lose sight of the fact that there may not be any purchaser even for the listed shares. In such a case can it be said that even listed shares are not marketable? In our opinion what is required is free transferability. Subject to certain limited statutory restrictions, the shareholders possess the right to transfer their shares, when and to whom they desire. It is this right which satisfies the requirement of free transferability. However, when the statute prohibits or limits transfer of shares to a specified category of people with onerous conditions or restrictions, right of shareholders to transfer or the free transferability is jeopardized and in that case those share with these limitations cannot be said to be marketable”(emphasis supplied)

Marketability of securities issued by a private limited company:

Shares Specifically restricts its transferability u/s 2(68) -Companies Act, 2013
Other securities


Prohibits any invitation to the public to subscribe for any securities of the company u/s 2(68) –Companies Act, 2013

Q 1. Whether SEBI has the power to regulate unlisted companies if they are issuing securities?

Ans: Yes

SEBI has the power to regulate unlisted companies if they are issuing securities

Case Law Sahara v. SEBI (Civil appeal No. 9813 and 9833 of 2011)

Hon’ble Supreme Court (SC) in its judgment dated 31 August 2012, held that:

  • A combination of debt instrument and equity instrument and therefore a hybrid security would also qualify as “security” if it is marketable and even if it is not specifically mentioned in the list of instruments as “securities” in SCRA

SEBI has the power to regulate unlisted companies if they are issuing securities

Any entity which issues instruments which are marketable securities, would become a “person associated with the securities market” and hence amenable to SEBI jurisdiction

Section 73

–Companies Act, 2013


Prohibition on acceptance of deposits from public.

Clause (1): On and after the commencement of this Act, no company shall invite, accept or renew deposits under this Act from the public except in a manner provided under this Chapter:

Section 2(31)

“deposit” includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India;

Rule 2(1)(c) of Companies (Acceptance of Deposit) Rules, 2014, excludes the following amount received by a Company from the ambit of Deposit and shall not be considered as deposits –

Rule 2(1)(c)(ixa) “any amount raised by issue of non-convertible debenture not constituting a charge on the assets of the

Private placement


Section 42 -Offer or invitation for subscription of securities on private placement.

Who can issue private placement?

  • Public company
  • Private company

Maximum number of person to whom private placement can be made

  • Maximum 50  OR
  • Such higher number as prescribed in financial year

The ceiling of 50 excludes:

  • Qualified Institutional Buyer (QIB)
  • Employees under stock option scheme under section 62(1)(b) of Companies Act, 2013

Maximum limit for making offer for Private placement as per the Companies (Prospectus and Allotment of Securities) Rules, 2014

  • Not more than 200 persons in the aggregate in a financial year, excluding QIB and employee under a stock option plan.

Offer of private placement: Max 200 persons

Allotment of debentures : Max 50 persons as decided by the board.

SEBI- LODR Regulations


Clause (2)

The compliance with the corporate governance provisions as specified in regulations 17,18, 19, 20, 21,22, 23, 24, 25, 26, 27 **and clauses (b) to (i) of sub-regulation (2) of regulation 46 and para C , D and E of Schedule V shall not apply, in respect of –

1. Listed entity (Companies-Public/Private)

  • Paid up equity share capital < 10 crore AND
  • Net worth < 25 crore

as on the last day of the previous financial year:


  • Regulation 17- Board of Directors
  • Regulation 18- Audit Committee
  • Regulation 19- Nomination and remuneration committee
  • Regulation 20- Stakeholders Relationship Committee
  • Regulation 21- Risk Management Committee
  • Regulation 22- Vigil Mechanism
  • Regulation 23- Related party transactions
  • Regulation 24- Corporate governance requirements with respect to  subsidiary of listed entity
  • Regulation 25- Obligations with respect to independent directors.
  • Regulation 26- Obligations with respect to employees including senior management, key managerial persons, directors and promoters.
  • Regulation 27- Other corporate governance requirements
Regulation 15


Eligibility criteria for listing on the WDM segment of NSE.


Public issue/Private placement

Corporates (Public limited companies and Private limited companies):

1. Non-Structured Product/Non-Market linked Debenture

  • Paid-up capital of Rs.10 crores OR
  • Market capitalisation of Rs.25 crores (In case of unlisted companies Networth > Rs.25 crores)
  • Credit rating

2. Structured Product/Market linked Debenture

  • Networth of 100 crores
  • Credit Rating prefix of ‘PP-MLD’ denoting Principal protected market linked debentures followed by the standardized rating symbol

BSE is not providing any such eligibility criteria, anyway listing agreement needs to be followed.

Listing of shares A private company is not allowed to list its shares in a recognized stock exchange as section 2(68) restricts the right to transfer its shares
Listing of debentures


The Non-Convertible Debentures (NCDs) can be listed on the Wholesale Debt Market (“WDM”) segment of recognized stock exchange in accordance with the Debt Issue Regulations issued by SEBI and the Listing Agreement which governs the issue and listing of NCDs.

By virtue of section 2(52) of companies Act, 2013 the said private company becomes a listed company

Additional compliances


  • Implementation of vigil mechanism
  • Appointment of women director u/s 149(1)
  • Applicability of Secretarial audit u/s 204
  • Appointment of KMP u/s 203
  • Maintenance and inspection of documents in electronic form
  • Publish Results

Some provisions applicable to listed entities are now made applicable only to Listed public companies which includes:

  • Appointment of Independent Directors u/s 149
  • Formation of nomination & remuneration committee u/s 177
  • Audit Committee u/s 177
IND AS Applicability


Companies Ind AS Rules, 2015

Rule 4 sub rule 1

Companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India …

Ind AS is also applicable to holding, subsidiary, associate or joint venture of the above said company.


Companies whose securities are listed or are in the process of being listed on SME exchange or on the Institutional Trading Platform.



The Companies (Amendment Bill), 2020

The Bill seeks to empower the Central Government to exclude, in consultation with SEBI, certain class of companies from the definition of a “listed company”, primarily in cases where private companies choose to have their debt securities listed on a stock exchange. Per the present framework comprising of, inter alia, the SEBI Rules, a private company having a debt security listed on the stock exchange is treated as a ‘Listed Company’ for the purposes of the Act.

The concept will cease to exist, when Central Government introduce changes in the definition of listed company

Disclaimer: The views expressed in this article are personal and doesn’t constitute professional advice or a formal recommendation. The author doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.


Vibin K Varghese

Author Bio

Qualification: Student - CA/CS/CMA
Company: N/A
Location: Cochin, Kerala, IN
Member Since: 27 Mar 2020 | Total Posts: 1

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July 2021