A lock-in period is a stretch of time after a company's IPO during which certain shareholders cannot sell their shares, even though the shares are now listed and trading. If you hold unlisted shares in a company that goes on to list, your holding will usually be locked in for a period counted from the date of allotment in the IPO, not from the date you bought. The shares remain yours, they appear in your demat account, and their value moves with the market price — you simply cannot transfer them until the lock-in is released.
This guide explains where the restriction comes from, who it applies to, what it looks like in practice, and what happens on the day it lifts.
What a lock-in period actually is
A lock-in is a transfer restriction recorded against your shares in the depository system. It is not a freeze on ownership or a cap on price. You continue to hold the shares, you continue to be entitled to dividends and voting rights, and the market price applies to your holding from the first day of trading. What you cannot do is sell, gift, or otherwise transfer the shares until the lock-in expires.
The purpose is straightforward. When a company sells shares to the public for the first time, the regulator wants the people already on the register — founders, early investors, employees, and anyone who bought privately shortly before the offer — to stay invested for a defined period rather than exit into public demand on day one. It gives the newly listed price a chance to settle without a wall of pre-existing supply arriving at the same moment.
When a lock-in applies — and when it does not
A lock-in attaches to unlisted shares only in connection with an IPO. This is the single most misunderstood point in this subject.
While a company remains unlisted with no offer document filed, there is no regulatory lock-in on its shares. They are transferable in the off-market, subject to whatever the company's own articles of association and any shareholder agreements say — right-of-first-refusal clauses, board approval requirements and contractual restrictions are common in private companies, and are separate from anything the securities regulator imposes.
The regulatory lock-in comes into being when the company files its offer document and completes its IPO. At that moment the pre-issue shareholding is classified, and each class of holder is assigned a lock-in period. If the company never files, or files and withdraws, the lock-in never crystallises and the shares remain privately transferable as before.
Who gets locked in, and for how long
Different categories of shareholder are locked in for different lengths of time, and the periods are set out in the company's own offer document.
Broadly, the framework works in three tiers. Promoters carry the longest restriction, because a minimum portion of the post-issue capital must be contributed by them and held for an extended period, measured in months well beyond a year. Promoter holdings above that minimum contribution are locked in for a shorter period. Pre-issue shares held by everyone who is not a promoter — early investors, employees who have exercised options, and people who bought in the unlisted market — sit in the third tier with the shortest of the three periods. In recent years that non-promoter period has been six months from the date of allotment in the IPO. Anchor investors, allotted shares just before the issue opens, are a separate category again, with their own short lock-in releasing in two tranches.
Two cautions. These periods have been revised more than once as the rules have been reformed, generally in the direction of shorter lock-ins. And the period that binds a specific holding is the one stated in that company's offer document — treat the figures in any general article, including this one, as orientation.
One related point matters if you are hoping to sell into the IPO itself rather than after it. Shares generally have to have been held for a minimum period before the offer document is filed to be eligible for inclusion in an offer for sale. Buying shortly before a filing does not usually create a right to exit through the offer.
What the lock-in looks like in your demat account
Locked-in shares sit in your demat account with a lock-in flag against them, showing a lock-in reason and a release date.
Your holding statement will typically show the total quantity and then split it between free and locked-in balances. The locked-in portion cannot be delivered against a sell order. The valuation still reflects the market price, so your portfolio value moves normally; only transferability is constrained.
Two practical points follow. Shares must be in dematerialised form before the IPO for any of this to work, which is why holders of physical certificates are asked to dematerialise well in advance. And the lock-in is administered by the depository on instructions from the company's registrar, so the release is systemic rather than something you apply for.
What happens on the day the lock-in expires
On the release date the depository lifts the flag and the shares move from the locked-in balance to the free balance in your demat account. From that point they behave like any other listed share: you can sell them on the exchange through your broker at the prevailing market price.
Nothing is transacted on your behalf. Expiry simply restores your ability to act — there is no automatic sale and no obligation to do anything at all.
Lock-in expiry dates on larger listings are publicly known and watched, because a quantity of shares becomes eligible to trade on a known date. Whether that matters for any particular stock depends on how much is released, who holds it, and how liquid the counter is. That is a market observation, not a prediction.
Lock-in is not the same as your tax holding period
These two clocks are separate and they do not run together.
The lock-in is a transferability restriction that starts at IPO allotment. Your holding period for capital gains purposes generally starts when you acquired the shares, and it keeps running while the shares are locked in. Tax treatment also changes character on listing: unlisted and listed shares sit under different holding-period thresholds for long-term classification, the listed threshold being the shorter of the two, and the applicable rates differ as well.
The practical consequence is that a lock-in can expire before your holding qualifies as long-term, or well after it. They answer different questions. Our taxation overview sets out how gains on unlisted holdings are generally treated. A qualified tax adviser should confirm your own position, since it turns on acquisition date, cost, residency and the rules in force in the relevant year.
Where to check the exact position for a specific company
The offer document is the authority. Both the draft and the final versions contain a capital structure section that lists the pre-issue shareholding, identifies which blocks are locked in, states the period for each, and in most cases sets out the release dates in a table. These documents are filed publicly and are available on the regulator's and the exchanges' websites.
For companies still in the private market the questions worth asking before you buy are simpler: has a draft offer document been filed, what stage is it at, and what do the company's own articles say about transfer. Research and indicative pricing across the 237 companies we cover, including where each stands on the road to a listing, sit on the unlisted shares screener.
Common misunderstandings
"Unlisted shares have a one-year lock-in." No. There is no general lock-in on unlisted shares as such. The restriction arises through the IPO process.
"The lock-in runs from the date I bought." No. For IPO-related lock-ins the clock generally starts at allotment in the IPO, so an early buyer and a late buyer can be released on the same day.
"A lock-in stops me buying." No. It restricts transfer by the holder. Buying is not blocked, though a purchase made close to a filing may become a locked position once the company lists.
"If the IPO is postponed, I stay locked." No. If the listing does not happen the regulatory lock-in does not arise, and the shares remain subject only to whatever private restrictions already applied.
Frequently asked questions
What is a lock-in period for pre-IPO shares?
A lock-in period is a defined stretch of time after a company's IPO during which shareholders who held shares before the issue cannot sell or transfer them. The restriction is recorded against the holding in the depository system. The shares remain owned by you and carry full shareholder rights throughout; only transferability is suspended, and it resumes automatically on the release date.
Does the lock-in period start when I buy the unlisted shares?
Generally no. For IPO-related lock-ins the period is counted from the date of allotment in the public issue, so two people who bought at very different times before the IPO are typically released together. The exact start point and duration for any company are stated in that company's offer document.
Can I sell locked-in shares to someone privately instead?
No. The restriction covers transfer generally, not just sales on the exchange. Once the shares are locked in through the depository, an off-market transfer will not go through either. Limited exceptions exist within the rules for particular situations, but they should not be assumed to apply to an ordinary holding.
How do I know if my shares are locked in?
Check your demat holding statement. It shows the holding split between free and locked-in quantities, with a lock-in reason and a release date against the restricted portion. The company's offer document also sets out which pre-issue blocks are locked in and for how long.
What happens to the share price when a lock-in expires?
Nothing happens mechanically. Expiry only means a quantity of shares becomes eligible to trade. Whether that affects the price depends on how much is released, who holds it, and how liquid the stock is. Some large releases pass without incident; others coincide with visible volume. It is not predictable in advance.
If you hold unlisted shares in a company approaching an IPO and want to understand where your specific holding is likely to sit, our enquiry desk can talk you through the documents and the process.
This guide is published for information only. It is not investment advice and not a recommendation to buy, sell or hold any security. Buyunlistedshares.com is not a SEBI-registered investment adviser or research analyst. Prices shown on this site are indicative over-the-counter reference levels, not exchange quotes, and are not an offer to deal. Regulatory periods change; the offer document of the specific company is the authority for that company. Execution and settlement take place through separately registered intermediaries, and tax questions should be put to a qualified tax adviser.