Types of Financial Market
Capital Market- Nature and Role
Capital Market Reforms
Reforms Post 2000
The Companies Act, 2013- New rule of the game.
Types of Financial Market
The market where investment instruments like bonds,
equities and mortgages are traded is known as the capital
The primal role of this market is to make investment from
investors who have surplus funds to the ones who are running
Capital Market deals in long term capital securities (Equity or
Debt) offered by private business companies or the govt. of
Governed and regulated by Securities and Exchange Board of
NATURE and ROLE OF CAPITAL
It Has Two Segments
It Deals In Long-Term Securities
It Performs Trade-off Function
It Creates Dispersion In Business Ownership
It Helps In Capital Formation
It Helps In Creating Liquidity
Creates investment opportunities for small investors
Government raises capital for development projects
Barometer for the economy
Recent Developments in Capital
Markets in India
The 1990s have witnessed the emergence of securities
market as a major source of finance for trade and
industry in India.
Thus the Govt. of India and
SEBI has undertaken number
of measures in order to
improve the working of Indian stock market to
make it more progressive and vibrant.
Each scam has brought in reforms - 1992 / 2001
Screen based Trading through NSE, Jan 2003
Capital adequacy norms stipulated
Setting up of Private Mutual Funds
Dematerialization of Shares - risks of fraudulent paper
Entry of Foreign Investors
Investor awareness programs
Inter-action between banking and exchanges
Disclosure and Investor Protection Guidelines (DIP)
Access to International Capital Markets:
I. American Depository Receipts (ADRs),
II. Global Depository Receipts (GDR), Foreign Currency Convertible
Bonds (FCCBs) and External Commercial Borrowings (ECBs).
Screen Based Trading
Internet Trading-Mobile Trading
Establishment of Creditors Rating Agencies
Credit Rating Information Services of India Limited CRISIL (1988)
Investment Information and Credit Rating Agency of India Limited
ICRA(1991) and Credit Analysis and Research Limited CARE were set up
to assess the financial health of different financial institution.
Investor’s Education and Protection Fund (IEPF), 1991
Reforms in Primary Market and Mutual Funds to bring more
transparency and accountability.
Introduction of depository concept (Electronic Mode).
Stricter vigilance and market surveillance mechanism.
Introduction of buy-back of shares and its regulation.
Steps for practicing good corporate governance practice.
Trading in Options, Futures and Derivatives.
Rolling settlements at Stock Exchanges.
Empowerment of shareholders through legislative changes
in Companies Act, 1956.
Better transparency and disclosure through Listing
EDIFR - Electronic Data Filing and Retrieval System
Price Stabilization Fund
Multi Commodity Exchange
Setting up of Clearing
Corporation of India Limited
(CCIL), Venture funds etc.
have resulted into tremendous
growth of Indian Capital Market.
Delisting frameworks- The Securities Laws
(Amendment) Act,2004 amended the SCRA
that stock exchange may delist the securities after recording
Reforms Post 2000
Corporatization of exchange memberships
Banning of Badla / ALBM
Introduction of Derivative products - Index / Stock
Futures & Options
Reforms/Changes in the margining system
STP - electronic contracts
The Companies Act,2013
The Companies Act 2013 is an Act of the Parliament of
India which regulates incorporation of a company,
responsibilities of a company, directors, dissolution of
It is divided into 29 chapters containing 470 sections.
The Act has replaced The Companies Act, 1956 after
receiving the assent of the President of India on 29
The Act came into force on 12 September 2013
A total of another 184 sections came into force from 1
The provisions of this Act shall
Companies incorporated under this Act or under any previous
Insurance companies, except in so far as the said provisions are
inconsistent with the provisions of the Insurance Act, 1938 or the
Insurance Regulatory and Development Authority Act, 1999
Banking companies, except in so far as the said provisions are
inconsistent with the provisions of the Banking Regulation Act,
Companies engaged in the generation or supply of electricity,
except in so far as the said provisions are inconsistent with the
provisions of the Electricity Act, 2003
Any other company governed by any special Act for the time
being in force, except in so far as the said provisions are
inconsistent with the provisions of such special Act
FORMATION OF THE COMPANY
REGISTERED OFFICE OF THE COMPANY
RECTIFICATION OF NAME OF COMPANY
AUTHENTICATION OF DOCUMENTS,
PROCEEDINGS AND CONTRACTS
EXECUTION OF BILLS OF EXCHANGE
OPC - Only 1 member (should be an Indian citizen
and resident) At least 1 Director
Small Company -Not a public company . Paid up
capital not more than INR 5m and turnover according
to latest P&L does not exceed INR20m
Private Limited - Company members (2 to 200),
minimum two Directors .Restriction on transfer of
Public Company - Minimum 7 members, minimum 3
directors .Limits placed on remuneration paid to the
One Person Company (OPC)
Loans to director
Articles of Association
Appointment of Statutory Auditors
Limit on a number of members
Mergers and amalgamations
Revival and Rehabilitation of sick company
TRANSITION OF COMPANIES TO COMPLY WITH
THE COMPANIES ACT
LACK OF CLARITY IN CERTAIN PROVISIONS
(The Act provides that foreign companies in India need to furnish incorporation
papers, among others, to the Registrar of Companies, display their names
indicating country of origin, etc., but since the term “foreign company” is not
defined clearly, it has created confusion leaving interpretation problems between
former laws and the Act.)
THREATENING THE BASIC CONCEPT OF CSR
Summary Statistics of Indian Companies (March 31st, 2015)
COMPANIES CLOSED DORMANT COMPANIES
INACTIVE COMPANIES COMPANIES UNDER PROCESS FOR CLOSURE
ACTIVE IN PROCESS ACTIVE COMPANIES
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Registration of Companies Limited by Shares during Financial
Year 2009-10 to 2014-15
No. of Companies Authorized Capital Column1
0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
Registration of New Companies during 2014-15
Column1 Column2 Series 1
Active Companies 1956-57 to 2014-15
Total number of companies Column1 Column2
There has been little progress outside the equity
market and the corporate bond market
1. because regulatory guidelines severely restrict the
ability of banks and other financial institutions
to invest in corporate bonds.
Volatility of the market has increased over the years.
Retail investors have been running away from not
only the equity market, but also from mutual funds.
Only 3.5 million Indians – from a total working
population of 321 million invest in stocks.