Companies Act Section 2(81) Securities

Securities Section 2(81)

Securities refer to instruments that signify an ownership interest or a debt owed by an entity. These instruments can be traded on financial markets and represent financial value. 

1. Shares: 

Instruments that represent ownership in a company. 

Shares can be of various types such as equity shares, preference shares, etc.

2. Debentures: 

Instruments acknowledging a debt owed by the company, usually with a fixed interest rate and a specified repayment period.

3. Bonds: 

Similar to debentures, bonds represent debt obligations issued by a company or a government entity. 

They typically have a longer tenure than debentures and may also carry interest payments.

4. Other Marketable Securities: 

Any other instruments that are traded on financial markets and represent ownership interests, rights to ownership, or debt obligations.

Key Aspects:

Issuance and Regulation: 

Companies issue securities to raise capital from investors. 

The issuance and trading of securities are regulated by various laws, including the Companies Act, 2013, Securities Contracts (Regulation) Act, 1956, and rules and regulations issued by the Securities and Exchange Board of India (SEBI).

Investor Protection: 

Regulations governing securities aim to protect investors by ensuring transparency, disclosure of information, fair market practices, and accountability of issuers.

Types of Securities: 

Securities can be categorized into equity securities (like shares), debt securities (like debentures and bonds), and derivative instruments (which derive their value from an underlying asset).

Importance:

Capital Formation: 

Securities markets facilitate the mobilization of savings and allocation of capital to productive uses, thereby promoting economic growth and development.

Investor Confidence: 

Clear regulations and disclosure requirements enhance investor confidence in securities markets, encouraging investment and fostering liquidity.

Corporate Governance: 

Compliance with securities laws promotes transparency, accountability, and good corporate governance practices among issuers of securities.