Companies Act Section 24

Companies Act Section 24: Power of Securities and Exchange Board to Regulate Issue and Transfer of Securities, etc.

Section 24 of the Companies Act delineates the authority and responsibilities of the Securities and Exchange Board of India (SEBI) in regulating the issuance and transfer of securities, as well as related matters concerning listed companies in India. 

This section provides a framework for understanding the roles of SEBI and the Central Government in maintaining the integrity of the securities market. 

Below is a detailed breakdown of the key components of this section.

1. Regulation by Securities and Exchange Board

a. Scope of Authority

The Securities and Exchange Board of India (SEBI) is vested with the authority to regulate various critical aspects concerning the securities market, particularly focusing on:

Issue and Transfer of Securities: 

SEBI oversees the issuance and transfer of securities, ensuring that the processes adhere to established regulations. 

This oversight applies to companies that are already listed on recognized stock exchanges in India as well as those that are seeking to list their securities. SEBI’s role is crucial in safeguarding the interests of investors and maintaining market stability.

Nonpayment of Dividend: 

SEBI is also responsible for regulating issues related to the nonpayment of dividends by listed companies or companies that intend to list their securities. 

This includes monitoring compliance with dividend distribution norms and ensuring that shareholders receive their entitled dividends in a timely manner.

b. Regulatory Measures

SEBI administers these regulatory responsibilities by formulating regulations that align with its authority under the Companies Act. 

It is important to note that while SEBI has broad regulatory powers, specific provisions outlined in the Act may direct otherwise, indicating that SEBI must operate within the framework established by the law.

2. Regulation by Central Government

a. General Oversight

In circumstances where regulatory matters fall outside SEBI’s jurisdiction, the responsibility shifts to the Central Government. This includes:

Administrative Responsibilities: The Central Government will handle all regulatory matters that are not explicitly covered by SEBI’s authority as defined in subsection (1). 

This ensures that there is a clear distinction in the regulatory functions between SEBI and the Central Government.

b. Specific Matters

The section clarifies that specific issues, such as those related to prospectuses, returns of allotments, and the redemption of preference shares, will be managed by the Central Government, the Tribunal, or the Registrar. 

This delineation of responsibilities helps in creating a structured approach to regulatory oversight, ensuring that different regulatory bodies handle various aspects of company law efficiently.

3. Powers of the Securities and Exchange Board

a. Additional Powers

The Securities and Exchange Board is empowered to exercise additional powers that are conferred upon it by various sections of the Securities and Exchange Board of India Act, 1992. These include:

Subsections of Section 11: 

SEBI will exercise powers as outlined in subsections (1), (2A), (3), and (4) of Section 11 of the Securities and Exchange Board of India Act, which pertains to the general powers of the Board to protect the interests of investors and promote the development of the securities market.

Sections 11A, 11B, and 11D: 

These sections grant SEBI further regulatory authority related to the securities market, including the power to take necessary measures to prevent fraudulent and unfair trade practices.

b. Delegated Authority

Additionally, SEBI has regulatory functions delegated to it under the proviso to subsection (1) of Section 458 of the Companies Act. 

This delegation of authority allows SEBI to act effectively within its regulatory framework and respond to emerging challenges in the securities market.