EF1C_PPT2_SEBI_SHAREMARKET_2020B1 (1).pdf

BASEL to Bond
quiz.
Those getting 9 or
less correct out of
15Qs: this is
unacceptable level
of performance.
You’ve to work
harder.
Telegram: https://t.me/SimplifiedIAS https://www.upscexpress.com

In such Qs, go by
elimination method /
word-association.
Exactly what it means
is not imp.
Wrong statement is
asked.

• Nothing is asked randomly
from thin air, everything
given in handout.
• If 9/15 or less then you’ve
to revise more. UPSC is
not for lovers but killers. ये
कातिलों का इलाका है,
इधर आशिको का काम
नह ीं.fees you’ve paid for
self-discipline, weekly
progress is must. Binge-
watching, casual attitude
will not help.

MSME supplied goods, services.
Generated bill (invoice)
I’ll pay your invoice
next month.
Bank / NBFC*
(*Selected types)
Trade Receivables Electronic
Discounting System (TReDS), a type of
online exchange portal

Budget 2019

Financial
Instruments
Debt
(Short/Long)
Govt, pvt,
Intl. insti.
Equity
1. Types?
2. How to issue?
3. Who regulates
them? …
Could have motives ‘more noble’ than borrowing e.g. inflation,
gold consumption, electoral transparency, climate change
Google form Querries
replied in Tuesday
PDF.

Shareholder
Board of
Directors
Company
Chairman Managing
Director & CEO
Shareholders = owners/proprietors of
company. Last claim during liquidation

Shareholder
Board of
Directors
Company
Chairman Managing
Director & CEO
Shareholders = owners/proprietors of
company. Last claim during liquidation
Liquidation
1. Bond
2. Preferential
shares
3. Ordinary
shares

• UPA-era scheme that gave income tax
benefit to people who invest in the
share market for the first time.
• Discontinued in 2017
• mechanism,
• motive: Gold investment , Banks- NPA
problem  if companies mobilize
investment through shares it’ll help

Venture capital funds (VCF)
•Professional firms helping startup companies with
seed capital. (through debt / equity / hybrid)
Angel Investors
•Rich person helping startup companies out of his
hobby, passion, profit motive or time pass. e.g
Ratan Tata in Urban Ladder Furniture purchase
site/app. (through debt / equity / hybrid)

Pause Video to
Attempt it Yourself

Pause Video to
Attempt it Yourself
Observe they didn’t
ask ‘what’s the
difference between
seed capital type-A,
series-III funding.
So don’t waste time
learning technical
things.

Authorized Capital Rs. 5
lakhs. That is the max.
amount of shares we’ll
issue.

Suppose only Rs. 3
lakh worth shares
are bought by
investors.. “Paid up
capital” = Rs.3 lakhs
Authorized Capital Rs. 5
lakhs. That is the max.
amount of shares we’ll
issue.

Authorized capital
could be higher, say
2 cr.
Face
Value
25/4 lakh =
ownership
0.00625%
You’ll get that
much proportion
from dividend.

Face value/ par
value
•Can be any integer
•1,2,5,8,10,20,25,
50,100
•But not decimal:
1.50……x
Premium Value
•Rs.10 share with
Rs.30 premium
•Rs. 10 + 30 = 40

Suppose jio share bought
@face value of ₹ 10.
company generating ₹ 3
dividend a year

Suppose jio share bought
@face value of ₹ 10.
company generating ₹ 3
dividend a year
Plz sell me, I'm very
keen for this.
I’ll offer
Face value
(10)+@premium
value (2) = ₹ 12.
But I want to sell the
shares to invest
elsewhere /need
money to buy
home/vehicle.

Penny stocks
•Shares whose market price remain excessively
low compared to its face value. Such pathetic
companies give zero or little dividend.
Blue Chip stocks
•Shares of a nationally recognized, well-
established and financially sound company
with a history of generating good dividend.

Sweet Equity:
•shares sold @discount to directors, employees
for their value addition to company [but
regulated under Companies Act]
Share Pledging
•When promoter of a company e.g. Mukesh A. of
Reliance or Subhash Chandra of Zeegroup
pledges his shares as collateral to borrow loans
from a bank / NBFC.

Fear of theft, fire, forgery & delay
in settlement, hence
‘dematerialization” in mid-90s’
What if I keep shares –certificates
in paper format, in my file or
cupboard?
Meaning companies who issue
these paper shares- are stored in a
big locker. And then digitally
they’re traded.

Depository
•CSDL
•NSDL
Depository
Participant
•Bank
•Non-bank
Customer
•DEMAT
account
Linked with PAN card.
Tax, black money
tracking
Fear of theft, fire, forgery &
delay in settlement, hence
‘dematerialization” in mid-90s’
Paper shares stored here

similar danger if all
currency issued
digitally

Promoter
Underwriter
Underwriter
❑ US: Investment
banker
❑ UK: Merchant
Banker
Red herring prospectus
for approval

Promoter
Underwriter
Public issue
Underwriter
❑ US: Investment
banker
❑ UK: Merchant
Banker
• If IPO not fully subscribed,
then underwriter will buy
unsold shares.
• If IPO oversubscribed then
who will get shares? How?
Multiple methods, e.g. Lottery

Promoter
Underwriter
Public issue
SEBI reforms:
• DEMAT account linked with
PAN card (issued by IT dept:
more in Pillar#2: black
money)
• ASBA: application supported
by blocked amount
Rupal Panchal: Fake DEMAT accounts to increase
lottery chances of getting shares in IPO. Then she’d
sell it @higher prices in share market.

Promoter
Underwriter
Public issue
ASBA: application supported by
blocked amount [when you apply,
the amount is blocked in your bank
account, but it’ll be deducted if
only underwriter allots you shares:
ASBA benefits?
1) Non-serious investors don’t apply.
2) you earn interest until allotment is done.

Promoter
Underwriter
Public issue
Types of investors
1. Qualified Institutional Buyers (QIB):
Mutual Funds, Insurance Company,
etc. SEBI has separate registration
norms for them.
2. Anchor investors: QIBs who are
offered shares in an IPO a day before
the offer opens for retail investors. =
boost confidence in retail investors.
3. Retail investor: An individual
investor who is not a QIB.
4. FII / FPI ans. Pillar#3
Underwriter will keep
quota for each category
of investors, as per SEBI
norms.

Infosys….
Public Issue
IPO Follow on
FPO
Rights
issue
First existing
investors as per
existing holding
ELSE outsiders
Pvt
Placement
Not inviting
applications
from aam-
aadmi but
Qualified
institutional buyers
or selected buyers
If additional capital required, afterwards…
Not important
bonus shares /
share splitting /
share swap /
share buyback /
PE Ratio etc.
Poor cost:benefit
in MCQs

if wants to issues shares
USA, then SEC
permission, accounting
norms etc. 
Not a topic to be asked in Mains
so don’t lose sleep over its hindi
translation

USA, then SEC
norms etc. 

USA, then SEC
norms etc. 
1. Global Depository Receipt: multiple countries, US/Euro.
2. Foreigner entrepreneur wanting to issue shares in India in similar
route then: Bharat/Indian Depository receipt. Rs.

Financial
Instruments
Debt
(Short/Long)
Govt, pvt,
Intl. insti.
Equity
1. How to issue?
IPO, ADR/GDR
2. Where to store?
DEMAT
Next
1. What is SENSEX,
when does it go
up/down
2. MF, ETF…

Financial Market
Money Market Capital Market
Primary
Secondary
Short term <1 year Long term 1 year/>
T-bill,
Commercial papers..
Bond debenture,
shares

Financial Market
Primary
Secondary
IPO: shares sold to investors

Financial Market
Primary
Secondary
IPO: shares sold to investors
I think Baba Ramdev’s shares
will give more dividend. But my
money stuck in jio-shares. So
better i sell them @stock
exchange / share market

• Amsterdam Stock exchange (1602) Netherlands
World’s Oldest:
• Bombay Stock Exchange (1875)
ASIA oldest:
• BSE→A’bad→Kolkata→NSE
India’s Oldest
BOLT (BSE's On-
line Trading
System)
NEAT (National
Exchange for
Automated Trading).
BOLT, NEAT & other softwares’ data communication works
through VSAT (Very Small Aperture Terminal) Satellite.
What is VSAT Ans. Sci-tech books/internet

30k with
Mallya
70k with
public
Free Float Market Capitalization (FFMC)
= no. of shares with public x price
= 70,000 x ₹10 = 7 lakh. (1979)
SENSEX
calculation
Formula not
imp.

Financial Market
Primary
Secondary
Short term upto1 year Long term >1 year
Securities resold here
STAG (Male Deer)
Investor who buy newly
issued securities, quickly
sells them in secondary
market for quick profit.
In 2000s aviation
sector will boom,
and they’ll pay
huge dividend so
I want to buy
Kingfisher shares

•70k x ₹10 = 7 Lakh
FFMC (1979)
•70k x ₹2000 per share = 14
crores
FFMC (2018)

•70k x ₹10 = 7 Lakh
FFMC (1979)
•70k x ₹2000 per share = 14
crores
FFMC (2018)
𝐵𝑆𝐸 𝑆𝐸𝑁𝑆𝐸𝑋
= 𝐹𝐹𝑀𝐶 @
𝑝𝑟𝑒𝑠𝑒𝑛𝑡
𝐵𝑎𝑠𝑒 𝑌𝑒𝑎𝑟
∗ 100
=
14 crore
7 lakh
∗ 100 = 20,000 𝑆𝐸𝑁𝑆𝐸𝑋
What is SENSEX? (Sensitive index)
weighed average of FFMC of 30 companies,
30 companies are selected by BSE’s “Index Cell”.

SENSEX – when does it go up Goes down
RBI’s soft /easy monetary policy
→ cheap loan & credit cards →
consumers to spend more →
more profit to company→ more
dividend –investor thinks “better
I buy more shares to get more
dividend”: Bullish
Tight monetary policy
Bull
•Hopes prices
will rise, so
purchases
Bear
•Fears prices
will fall so,
SELLS

RBI’s soft /easy monetary policy
→ cheap loan & credit cards →
consumers to spend more →
more profit to company→ more
dividend –investor thinks “better
I buy more shares to get more
dividend”: Bullish
If budget: less income tax.
Tight monetary policy
More taxes in budget
Bull
•Hopes prices
will rise, so
purchases
Bear
•Fears prices
will fall so,
SELLS

SENSEX – when goes up Goes down
Peace, Economic boom
/ prosperity, Political
Stability
War, recession, political
instability,
protectionism, oil price
volatility→ Bearish
market…
Bull
•Hopes prices
will rise, so
purchases
Bear
•Fears prices
will fall so,
SELLS
Companies will make
more profit→ more
dividend

When govt. hikes foreign
investment limits
Inverse.
Merger-Acquisition, new product
launches, land / environment
permissions for new factory
CEO/MD arrest/FIR, Courts
slapping fine, media exposing
scandal…
Bull
•Hopes prices
will rise, so
purchases
Bear
•Fears prices
will fall so,
SELLS
Companies will launch new products
make more profit→ more dividend

33517
32595
33705
10:00 AM 10:09 1:35PM
SENSEX
BJP not likely to
win, as per the
initial counting
Investors think: “What if Cong. Govt in Gujarat cancels Adani port license or Tata’s land allotment or puts
more tax on Ambani’s refinery? Our dividend will be hurt better sell & run!!

33517
32595
33705
10:00 AM 10:09 1:35PM
SENSEX
(Mains/Essay) FB / paid media → not
just voters but investors’ opinion
affected→ stock exchange → larger
repercussion on economy as a whole….
BJP not likely to
win, as per the
initial counting
BJP will form
Government
Investor think: “What if Cong. Govt in Gujarat cancels Adani port license or Tata’s land allotment or puts
more tax on Ambani’s refinery? Our dividend will be hurt Better sell & run!!

Such minute
analysis not
imp.
For similar reason:
not wasting time in
‘Bond Yield’.

Pause Video to
Attempt it Yourself
Just looking at question
‘its easy’ = Don’t
‘glance’ over keywords
and tick the first thing
that fits the bill. Do read
carefully. Sometimes
there can be trap.
Sankalp, Saksham,
Shashakt

•Sensitive Index/ सींवेद सूचकाींक. It’s the weighted
average of Free Float Market Capitalization (FFMC) of 30
companies , selected by BSE’s “Index Cell”.
SENSEX?
•National Stock Exchange (NSE)’s index of 50 companies
NIFTY?
•Tokyo Stock Exchange index of 225 companies.
Nikkei

Pause Video to
Attempt it Yourself
No, it belongs to National
Stock Exchange (NSE) &
regulated by SEBI

Executive
order
1988
Statutory
Body
SAT
1992
Amendment
1999, 2014
it can order search and
seizure, attachment of
properties, arrest and
detention.
Harshad Mehta
scam
SAHARA scam

Executive
order
1988
Statutory
Body
SAT
1992
Amendment
1999, 2014
it can order search and
seizure, attachment of
properties, arrest and
detention.
1. Regulates Process of issuing securities (Bonds, Shares, IPO, ETF, ReIT, INVITs, etc.)
under the Securities Contracts Regulation Act, 1956 [SCRA].
2. Regulates Places (Depositories, Stock exchanges, Commodity Exchanges etc.)
3. Regulates Persons (individual investors, QIB, FPI, Brokers, Fund Managers, Public
Limited companies etc.)
4. Regulates any collective investment scheme ₹100 crore / >
Harshad Mehta scam SAHARA scam

5 year/65 age.
But he’s given 3 years.
Reappointment possible.
+ 1 officer from RBI + 2 officers from Union Government + 5 members appointed by Union
SEBI demanding to Government that
SEBI officer should also have a seat
reserved in RBI board…but not yet done.
Besides RBI act amendment will be
required for that!

5 year/65 age.
But he’s given 3 years.
Reappointment possible.
+ 1 officer from RBI + 2 officers from Union Government + 5 members appointed by Union
Appeal: Securities Appellate tribunal (SAT). →SC.
Similarly, IRDAI, PFRDA→SAT.

p77

200
9000
1992, Jan 1992, April
600
8000
2001 2001
Harshad Mehta
Ketan Parekh
Arranged money
from banks with
fake documents /
fake promises.
Used money to
quickly buy shares
to increase their
prices…
Look how quickly its
rising, better I buy
this, it’ll reach to
18,000 then I’ll
make 2x profit!!!
Modus operandi
not imp.

10% up or
down
• 1 hr halt
15%
• 2 hr
20%
• Whole day
Benchmark: previous day’s
BSE-SENSEX / NSE-NIFTY
If we don’t stop then
small investors will
loose.
It’ll hurt “deepening” of
capital market.
Mechanism, figures
not important,
MOTIVE IS.

Before SEBI reform
•T+(upto) 72 days
•Misuse? Delay in
settlement. Iski top uske
sar pe (promising to
trade same share with
multiple parties)
After SEBI reform
•T+2 days settlement
•One party delivers
shares/bonds, other
party pays money – settle
this trade within 2
working days.
Mechanism not
important, MOTIVE IS.

Why this is bad and illegal?
1.Client defrauded because broker is not ‘executing’ the trade.
2.Government is deprived of Securities Transaction Tax, Capital
Gains Tax. (more with BUDGET lecture.)
Mechanism not
important, MOTIVE IS.
Broker uses BOLT/NEAT software..to check price,
but trade happens only in his “Dabba” (unofficial ledger.) not in the official DEMAT
accounts- he waits till prices fall to make purchase so he can make more profit from client’

SEBI rules are
technical in nature.
So we need not
bother with
mechanisms,
irrespective of the
information overload
created by
DNA/PDF/Magzwalla

Booked even before
we load the page
Booked even before
we can find!
Some unscrupulous elements hackers/nerds/ geeks
must be using automated bots / scripts.→to sell them at
higher prices later on. So bad for genuine customers

Algo Trade = computer
Algorithms to do automated
buying/selling shares.
Hence SEBI issuing norms
like “can’t place more than
100 orders in a second”

Castor seeds,
cotton, wheat,
basmati
AGRI:
Aluminum,
gold, silver
METAL:
Oil, coal
ENERGY:

Castor seeds,
cotton, wheat,
basmati
AGRI:
Aluminum,
gold, silver
METAL:
Oil, coal
ENERGY:
Warehouse
receipt
Farmer

Castor seeds,
cotton, wheat,
basmati
AGRI:
Aluminum,
gold, silver
METAL:
Oil, coal
ENERGY:
Warehouse
receipt
Farmer
Jignesh Shah generated fake warehouse
receipts@NSEL ~5600 cr. Scam
FMC→merged with SEBI (FinMin) in
2015

p77
p78

Jaane kya hogaa
Raamaa re…..

FSDC is at
national level,
then what about
the
@international
level

@international
level

Pause Video to
Attempt it Yourself
#3 is definitely right. Everything
boils down to whether second
statement is right or wrong!

Financial
Instruments
Debt
(Short/Long)
Govt, pvt,
Intl. insti.
Equity
1. Types?
2. How to issue?
IPO, ADR/GDR
3. Where to store?
DEMAT
4. Where to sell?
BSE-NSE, indices
5. Who regulates
them? SEBI &
SCAMs &
supervision
Could have motives ‘more noble’ than borrowing e.g. inflation,
gold consumption, electoral transparency, climate change
So, what are we
studying?

Financial
Instruments
Debt
(Short/Long)
Govt, pvt,
Intl. insti.
Equity
INVESTMENT Funds
Individual person may
not have the time /
expertise. So we help
them. Mutual fund,
hedge fund, ETF….
Where shd I invest, I don’t have time /
expertise. plz help!?

investor
Fund manager
Invested
Rs.
Units
Sold
Interest, Dividend
Return
Portfolio
Subtypes “gilt-edged” (only G-Sec),
“liquid MF (only short term debt
instrument) & so on
“growth fund” subject
to market risk
Equity-Linked Savings
Scheme (ELSS)
- Contribute money,
invested in equities
(shares)
- It’s given certain tax
benefit in Income Tax

investor
Fund manager
Invested
Rs.
Units
Sold
Interest, Dividend
Return
Fees: entry
load, exit load. Net Asset Value (NAV)
depending on the underlying
assets’ daily prices. (Even
bond prices may fall…e.g
IL&FS)
Portfolio
Assured returns (except
when IL&FS)
“growth fund” subject
to market risk

As such rarely 1-2 MCQ
coming from the SEBI-
Sharemarket topic.

HNI investor
Fund manager
Invested
Rs.
Units
Sold
Return
Risky Bonds, risky methods
•Hedge Funds for HNI (min.1 cr)-
he’ll invest in “junk bonds” &
risky trading strategies. For
better returns.
•SEBI tighter norms
Soon to finish projects
•Real Estate Investment Trust
(REITS) for HNI (min.2l)
•Infra: InVITs for HNI (min.10l)
High net worth individuals
(HNI) who can invest big
amount and want better
returns.

investor
Fund manager
Invested
Rs.
Units
Sold
Dividend, interest, rent, toll
Return
Share/bonds/G-Sec
•Mutual Funds for aam-
aadmi.
•high-risk high reward: Hedge
Funds for HNI (min.1 cr)
Soon to finish projects
•Real Estate Investment Trust
(REITS) for HNI (Min. 50k)
•Infra: InVITs for HNI (Min.1l)
SEBI permitted because
Stressed developer gets new
finance.
Investors get new instrument.
Can even sell units @stock
exchange to third party.

ONGC Coal India IOC GAIL (India) Oil India
PFC
Bharat
Electronics
REC
Engineers
India
Container
Corporation of
India.
10 CPSE→ 2014: shares given to Goldman Sach MF
More in Pillar#2
Public Sector Companies
If government tried to sell individual companies shares, it
may not find immediate buyers/ may not get the best price,

Portfolio
Goldman Sach
ONGC, CIL, GAIL
10 CPSE shares
Rs.3kcr.
If I hold these units, I’ll get
returns based on how much
dividend these CPSEs generate.

Portfolio
ONGC, CIL, GAIL
10 CPSE shares
Rs.3kcr. New Fund
Offer
BSE-NSE
If I hold, I’ll get returns based on
how much dividend these CPSEs
generate.
And I may even sell it to
third party, IF I want pull
out money to invest in
Ramdev-IPO.
Lower fees than
Mutual funds!!
I may buy
@Rs.12 If I
think ONGC
will profit more

Fund manager
ICICI prudential
BHARAT-22 ETF Cos. CPSE,
PSB, UTI’s undertakings.

If u invest, we’ll give u
IT-tax benefit (more in
pill#2)

NFO
BSE-NSE
If I hold units, I’ll get returns
based on price movement of
gold
And I may even sell it to
third party, IF I want
pullout money to invest in
Ramdev-IPO/shares.
I’ll buy additional gold, sell
existing gold depending on
price movement
If I put gold in
this box, &
generate
securities then its
Gold-ETF

Qatar’s public sector
insurance company’s
surplus funds
Qatar’s Finance
Ministry’s surplus
funds
Sovereign Wealth
Fund
I’ll invest it within
country and outside
SideQ:
What is National
Investment &
Infrastructure Fund
(NIIF) Ans. Pillar#5:
Infrastructure

AIF
Category
I
They generate positive spillover effects on the
economy. Example: Venture Capital Funds, Angel
investors fund, social venture fund, Infrastructure
funds. SEBI norms are easy on them.
AIF
Category
II:
Neither in Cat-1 nor in Cat-3 E.g. Private Equity or
debt fund.
AIF
Category
III:
They undertake excessive risk to generate high
returns in short period of time. E.g. Hedge Funds .
SEBI norms are stricter on them, else they may
destabilize the capital market.

Offshore Investor
Without PAN card,
DEMAT account
or SEBI Registration
SEBI
registered
FII/FPI
(India)
FII/FPI’s
portfolio
FII: foreign institutional investor,
FPI: foreign portfolio investor.
More in Pillar#3

Offshore Investor
Without PAN card,
DEMAT account
or SEBI Registration
SEBI
registered
FII/FPI
(India)
FII/FPI’s
portfolio
P-Note
Derives value
from
FII portfolio

Phony /shell
company in India
SEBI
registered
FII/FPI
(India)
P-Note
If he directly sent me money
from Pakistan then NIA, ED
etc. could get alerted.

Sells share@profit:
DEMAT account
linked with PAN Card
Buys share:
DEMAT account
linked with PAN
Card
You made __ profit then you’ve to pay __
Capital Gains Tax, I know it because we are
tracing your demat account, PAN card.

Offshore Investor
Without PAN card, DEMAT
account
or SEBI Registration SEBI
registered
FII/FPI (India)
FII/FPI’s
portfolio
P-Note
Derives value
from
FII portfolio
Tax evasion, Money laundering. Terror finance so SEBI
norms regarding who can issue, how much fees?...

82
83

Financial
Instruments
Debt
(Short/Long)
Govt, pvt,
Intl. insti.
Equity Derivatives
Mutual Funds, Hedge Funds,
CPSE-ETF
Sharemarket
Derive value from other assets
- P-Notes: from underlying
shares, bonds understood
- Other derivatives based on
loan papers, oil barrels, gold,
foreign currency.
May be ‘more noble’ than
borrowing e.g. inflation, gold
consumption, electoral
transparency, climate change

Financial
Instruments
Debt
(Short/Long)
Govt, pvt,
Intl. insti.
Equity Derivatives
Mutual Funds, Hedge Funds,
CPSE-ETF, P-Notes
Sharemarket
May be ‘more noble’ than
borrowing e.g. inflation, gold
consumption, electoral
transparency, climate change
SWAP = swapping one asset
with another. E.g. take my ₹
& give your Japanese Yen.
Currency swap agreement
(more in Pillar#3).
Similarly, Credit default ,
interest swap

Sell, purchase, execute instantly
SPOT Market
Sell, purchase, execute @later date
Forward / Future contract e.g.
“on 1/5/20 I’ll sell you 100 Nos.
of Infosys shares @₹1000 each)
How much
time exactly,
not imp?

SPOT Market
On 1/5/2020 What if buyer/seller
better prices elsewhere? “Risk”. We
should “hedge”(protect) ourselves
with insurance.. called “Option”
contract

SPOT Market
Three parties
1. Buyer
2. Seller
3. Insurer
(writer)-
fee/premium
On 1/1/2020 What if buyer/seller
better prices elsewhere? “Risk”. We
should “hedge”(protect) ourselves
with insurance.. called “Option”
contract
1. Call Option
2. Put Option
Internal difference
& mechanism not
important

Pause Video to
Attempt it Yourself
Vague idea is sufficient. Beyond that if
you try to understand & dissect
everything from Investopedia.com=
poor cost:benefit.
Don’t confuse the term with ‘Hedge fund’
which is a separate thing.

Chartered Companies
•Setup by a charter given by a king / queen.
E.g. East India Company (1600)
Statutory Companies
•Setup by by Special Acts of Parliament or
Vidhan Sabha. E.g. RBI, LIC, SBI.
Registered Companies
•Registered under Companies Act, 1956 (and
later 2013) e.g. Reliance, Tata, Infosys.
Process of registering
a company. Then
company becomes an
“artificial legal
person”. It can enter
into contracts in its
own name.
But we need not
overthink abt it in
B.Com/LLB way.

Steel Authority
of India (SAIL),
India Post
Payment Bank
(IPPB)
Public Sector
Reliance,
Adani, Tata
Private Sector
We’re the majority
shareholders here.
shareholders here.

Steel Authority
of India (SAIL),
India Post
Payment Bank
(IPPB)
Public Sector
Reliance,
Adani, Tata
Private Sector
Subsidiaries
Holding Tata
Sons Ltd.
TCS
Tata
Steel
Tata Sky
Subsidiaries
Holding Gujarat Urja Vikas Nigam Ltd. (GUVNL)
Uttar Gujarat
Vij Company
Ltd.
Dakshin Madhya Paschim
shareholders in
subsidiary
companies.

Suppose I invested Rs.10 share,
then my liability is limited upto
that ₹10 only, EVEN if 5000
people ask refund for defective
jiophones.

Joint Stock
Company
Private ltd.
2-200
Public Ltd.
7-unlimited
Suppose I invested Rs.10 share,
then my liability is limited upto
that ₹10 only, EVEN if 5000
people ask refund for defective
jiophones.
Incorporated under provisions of an
act like Companies Act

Joint Stock
Company
Private ltd.
2-200
Public Ltd.
7-unlimited
Can’t ask public at large to
subscribe to their share/bond
Can do it.
Suppose I invested Rs.10 share, then my liability
is limited to that much only, EVEN if 5000 people
ask refund for defective jiophones.
Incorporated under provisions of an
act like Companies Act

Pause Video to
Attempt it Yourself
No need to overthink “how is it
democratic management
when Mukesh Ambani owns
large no. of shares?”
Such random bombs
will be dropped in real
exam. 50:50 or skip.

Companies
Act
2013
Private ltd.
2-200
Public Ltd.
7-unlimited
124
Under Indian Partnership Act 1932
•A Partnership firm is formed by
minimum 2 or more partners.
•Each partner is liable jointly with all
the other partners for losses, wrongful
biz. decisions and misconduct.
Under LLP Act 2008
•Limited Liability Partnership (LLP)
Company is formed by minimum 2 or
more partners.
•Individual partners are shielded from
joint liability created by another
partner's wrongful business decisions
or misconduct. E.g. Vajiram and Ravi
IAS Study Centre LLP
registration fees, auditing/reporting norms,
tax liabilities, winding up process etc=
cumbersome, expensive, need to hire CA
How, Why? Ans. Not here for C.A. exam.

Companies
Act
2013
Private ltd.
2-200
Min.2-Max15
Public Ltd.
7-unlimited
Min.3-Max15
125
Under Indian Partnership Act 1932
•A Partnership firm is formed by
minimum 2 or more partners.
•Each partner is liable jointly with all
the other partners for losses, wrongful
biz. decisions and misconduct.
Under LLP Act 2008
•Limited Liability Partnership (LLP)
Company is formed by minimum 2 or
more partners.
•Individual partners are shielded from
joint liability created by another
partner's wrongful business decisions
or misconduct. E.g. Vajiram and Ravi
IAS Study Centre LLP
registration fees, auditing/reporting
norms, tax liabilities, winding up
process etc. 
How, Why? Ans. Not here for C.A. exam.

Companies Act
2013
Private ltd.
2-200
Public Ltd.
7-unlimited
Listed
Infosys
Unlisted
IPPB
Majority companies in
India are registered as
pvt ltd.
can invite public to
subscribe to its shares
and bonds.
MIND it: this is not
based on Government
ownership (public
sector, private sector)
but the number of
‘owners’ (public limited,
private limited)

Companies Act
2013
Private ltd.
2-200
Public Ltd.
7-unlimited
Listed
Infosys
Unlisted
IPPB
Majority companies in
India are registered as
pvt ltd.
can invite public to
subscribe to its shares
and bonds.
It’s a ‘public sector’ company,
but its shares not yet listed
@BSE/NSE etc.
It’s a ‘private sector’
company, its shares are listed
@BSE/NSE etc.

Next topic: Corporate Governance: that we’ll study in the next lecture.

EF1C_PPT2_SEBI_SHAREMARKET_2020B1 (1).pdf

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