Markets regulator SEBI on Friday issued an informal guidance letter clarifying that off-market sales of unlisted equity shares by existing shareholders through private negotiations will not be treated as deemed public issues, provided the number of purchasers does not exceed 200 persons in a financial year. According to reports from The Economic Times, this clarification came in response to IDBI Bank's query regarding its proposed sale of unlisted equity shares to non-qualified institutional buyers through off-market transactions. The guidance letter was made public on Friday, July 31, 2026, providing much-needed regulatory clarity for companies seeking to divest their unlisted equity holdings through private negotiations without triggering public issue requirements.
As reported by The Economic Times, SEBI stated that these transactions are secondary transfers by existing shareholders and do not constitute an offer or invitation by the company to subscribe to securities. The regulator emphasized that these transfers would not trigger public issue requirements, subject to compliance with the prescribed limit on the number of purchasers. The Companies Act does not mandate or restrict the categories of persons to whom the placement/transfer can be made by a company, but restricts the number of persons in a private placement. According to the guidance, placement made to QIBs can be excluded when calculating the number of persons for determining whether the offer is made to over 200 or not in a financial year.
According to the guidance letter made public on Friday, July 31, 2026, contractual rights such as the right of first refusal (ROFR) available to company promoters can be honoured while carrying out such share transfers. As reported by The Economic Times, the transfer can be made through a non-advertised privately negotiated transaction to identified investors, including non-QIB investors, provided the transfer is made up to the prescribed limit of 200 persons in a financial year. The regulator noted that placement made to QIBs can be excluded when calculating the number of persons for determining whether the offer is made to over 200 or not in a financial year, ensuring these transactions remain private and do not constitute deemed public issues.
As reported by The Economic Times, IDBI Bank sought this guidance for its holdings in unlisted companies acquired through loan restructuring, invocation of pledged shares, and direct investments. The bank's query prompted SEBI to issue this informal guidance, providing much-needed clarity for companies seeking to divest their unlisted equity holdings through private negotiations without triggering public issue requirements. The clarification ensures that such transactions remain within the regulatory framework while providing flexibility for companies to divest their unlisted equity holdings through private negotiations with up to 200 buyers.
