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A secondary sale is when a founder or early investor sells their shares to a new investor, not the company raising money (which is a primary transaction). The company receives no proceeds, the selling shareholder does.
Startup ecosystem · Exit
Secondary sale: founder selling shares before company exit
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Provisions
IT Act, Sec 45 | FEMA 1999 | Companies Act 2013, Sec 56
Analysis
ROFR: Most SHAs give other existing shareholders right of first refusal before you can sell to an outsider. Check your SHA, failure to offer ROFR can invalidate the transfer. Tax: Same as acquisition exit above, LTCG at 12.5% if held 24+ months, slab rate if STCG. FEMA: If buyer is a non-resident, pricing must comply with FEMA pricing guidelines (Rule 11UA floor).
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