How do I sell my unlisted shares?
Unlisted shares might be lesser-known, but not a new asset class for the investors. However, an unlisted market is a marketplace for those companies, which are public but not listed on the stock exchange. Such companies have a limited number of shares as the free float among the investors.
Startups and other private companies offer stocks as a part of their compensation for their employees due to limited cash flow. It gives the employee a right of ownership as he actually owns a part of a company in the form of equity shares.
If a company is listed on a stock exchange, the buying and selling of shares become very easy. This marks a swift entry or exit at any counter. However, in the case of unlisted shares, companies are not bound to follow the norms and regulations of the Securities or Exchange Board of India or SEBI.
However, such incorporated enterprises are registered with the Ministry of Corporate Affairs. Entry in such companies is tough and exit from such enterprises is even tougher if you do not know the right way or mechanism.
Selling listed public stocks is very easy as you only have to place the order and the trade takes place. It simply matches your selling price at which there is a buyer on the exchange.
However, in the case of private stocks or unlisted stocks, the selling mechanism is very much different. However, the process remains the same but the procedure differs.
In the unlisted market, investor or the employees reach out to the brokers or the dealers active in the unlisted market. Selling unlisted stocks means selling a stake in a company that is not listed on the exchanges.
It can be a tedious task to find a prospective buyer on your own. Sometimes employees are in dire need to liquidate their position to get cash and finding a buyer on an immediate basis is not a very easy job.
Sometimes, to sell your personal stake in an unlisted company, stakeholders need approval from the company boards as well. The process might be very much complicated, involving a lot of paperwork and approvals. One such example is the National Stock Exchange (NSE) which is widely in demand.
Selling stocks of IPO bound companies
There are various companies, which trade in the unlisted market ahead of their IPOs. Buying and selling shares of such companies is relatively easy as investors will continue to hold these stocks even after listing. However, there is a mandatory lock-in period for the pre-IPO stocks.
There is a vast market for such shares and many dealers are active in this space. What may appear to be a venture capital market to the masses can be a potential Pre-IPO private company stock exchange for potential sellers. Employees and investors can use these markets for selling their stocks.
Selling stocks of non-IPO companies
It is comparatively difficult to sell stocks that have no plans of launching an IPO in the near future. Such companies are less in numbers and are even lesser-known among investors. Furthermore, the float of equity in the open market is very limited as well. This adds to the anonymity quotient of the companies.
However, these companies release their quarterly numbers and result once a year so that investors can understand the financial health of the companies. Such companies are for the investors who wish to join the growth stories of a company at an early stage and can invest a decent sum for the longer horizon. Such a theme is called growth investment.
For such tasks, investors always require a reliable name as they do not wish to be a victim of online scams or ‘phishy’ activities, which leads to the transfer of shares, and money is not given by the so-called dealers.
Also, another challenge for the investor is to crack the deal at the fair value in the unlisted market as there are few elements that may try to misuse your need for the money.
The Process of Sale
The process of selling unlisted shares is very much easy if you are able to find a genuine dealer. Get in touch with the concerned entity or its spokesperson. An Investor will need to share your details with proofs including DMAT account, Client Master Report (CMR).
The investor needs to transfer the unlisted share which he/she wants to sell with the quantities to the buyers or broker’s DEMAT account. The same day when the dealer receives the unlisted shares in his DEMAT Account, the payment is done by the latter via the preferred mode of transfer.
What is a Client Master Report (CMR)?
Client Master Report (CMR) copy is a paramount document, required to buy unlisted and Pre IPO shares. CMR contains Depository Participant Identity (DP ID), Client ID, PAN number, Bank Account Number, along with more details.
This can be easily obtained by sending an email to the broker and the same is delivered within a few hours. The dealer will require a PAN Card, Aadhar Card, and a copy of DIS Slip, which is used to transfer shares into the account.
It is possible to transfer shares from one Demat account to another using a simple procedure. Trading through a Demat account is just like making transactions through a bank account. The only difference is that you transfer shares through the Demat account instead of money.
With respect to shares held with NSDL or CDSL depositories, the offline procedure for transfer of shares through off-market transfer is possible. One needs to fill out a DIS (Delivery Instruction Slip).
ISIN number of the shares to be transferred, name of the company (security), Demat account, and DP ID of the account to which the shares are being transferred must be filled up in the form. The form needs to be submitted to the old broker’s office for further processing.
If shares are held with CDSL, there is an online facility for the transfer of shares using the ‘EASIEST’ platform. One needs to register on this platform using the link, https://web.cdslindia.com/
Please Note : One can only transfers shares from CDSL Easiest to trusted demat account. So, before initiating the share transfer from CDSL easiest, please add the trusted demat account.
How to Add trusted demat account?
1. Login on the CDSL account (https://web.cdslindia.com/myeasi/Home/Login) .
2. Go to “Miscellaneous” and Under that, click ” Edit Trusted Account“.
3. Enter the Demat ID of 16 numbers to whom you want to transfer shares.
4. An OTP will come on your mobile number to verify it.
5. The account will be approved by broker within 24 hrs and then you can transfer shares.
How to transfer shares via CDSL Easiest?
1. Login on the CDSL account (https://web.cdslindia.com/myeasi/Home/Login)
2. Go to “Transaction Tab” and click “Setup“.
3. Click “Bulk Setup” after that.
4. Select ‘Transaction‘ and enter the execution date and enter the Beneficiary owner ID(BOID), you need to transfer the shares to. In that page select ISIN. When you click on Account ISINs, you will see a list of all the ISINs in your holdings. Select the ISIN and enter the quantity and select the reason for trade from a list given.
5. Once you complete the above process, a verification will come. Verify it. Once you do that, a page will open, in that you needn’t fill the Exchange ID, Counter Party Exchange ID, Market Type, Counter Party Market Type, Settlement ID and Counter Settlement ID for off-market transactions.
6. Finally click on “Commit” and type the 8 digit CDSL PIN which you have received on your email id when you have registered for CDSL Easiest.
7. The request will go the broker and he will verify it and transfer will be done.
How to transfer shares via Angel Broking Online Facility?
1. Login to https://trade.angelbroking.com/
2. Go to “More” and Select ” Online-DIS”.
3. Select “Off-Market” and select whether you want to transfer in NSDL account or CDSL Account.
4. Enter target DP ID , Client ID, Reason of transfer, and select the scrip you want to transfer along with quantity.
5. After that you will be taken to CDSL website to enter TPIN (alternate to POA). If you don’t have TPIN you can generate from the following link.
6. Enter TPIN and the request will go to broker for transferring of shares.
Charges for transferring shares via CDSL Easiest:
1. Rs.25 or 0.03% whichever is higher is the DP charges.
2. If the reason of transferring of shares is not gift or self transfer, then stamp duty of Rs.15 on 1 lac value transaction need to pay to CDSL.
Calculator for Stamp duty – https://ww1.cdslindia.com/StampDuty/Cal_StampDuty.aspx
How to Pay Stamp duty – https://www.cdslindia.com/Downloads/Publications/Newsletter/2020/July%202020%20e-infoline.pdf
Check out our video to understand more about transferring unlisted shares via CDSL.