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CompaniesAct.in: Graduated Securities-tightening screws CompaniesAct.in
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Updated On: 28/06/2014

Now updated based on Final Rules

Introduction

Till the year 2000, the term “Securities” did not find any place in the Companies Act, 1956. The Act defined only Shares and Debentures as  instruments that could be issued by the companies. With passage of time, regulators realized that the term shares and/ or debentures were too restrictive, especially as a variety  of instruments were being issued by India Inc. So, in the year 2000, the Act was amended to include new terms such as depository, securities, employee stock options, and hybrid

While most of the insertions were accepted by the Industry, the term “Securities” gave nightmares to many.

The definition of securities in The Companies Act, 1956 [Sec 2(45AA)] is governed by the definition in The Securities Contracts (Regulation) Act, 1956 [or SCRA].

Most of the provisions in the 1956 Act apply only to shares and debentures and not to all the types of securities. However, the Companies Act, 2013 envisages many changes in the applicability of the definition of securities.

Definition of Securities

Section 2 (45AA) of The Companies Act, 1956 defines securities as  securities mean securities as defined in clause(h) of Section 2 of The Securities Contracts (Regulation) Act,1956, and includes hybrids.

According to SCRA, securities include:






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