Understanding Section 24 of the Companies Act, 2013 – Where SEBI Takes Charge
When a company decides to raise money from the public, things change.
It’s no longer just about promoters and internal decisions. Public money enters the picture. And once that happens, regulation becomes non-negotiable.
That’s where Section 24 of the Companies Act, 2013 quietly but firmly steps in.
This section hands over a large part of the control to Securities and Exchange Board of India — especially when it comes to the issue and transfer of securities by listed companies, or companies that are planning to get listed.
Why Section 24 Exists
The stock market runs on trust.
Investors buy shares believing that disclosures are honest, pricing is fair, and rules are being followed. Without a strong regulator, that trust collapses very quickly.
Section 24 exists to make one thing clear:
when it comes to listed companies and securities markets, SEBI is in charge.
Not the company.
Not the promoters.
Not the board alone.
What Section 24 Actually Does
At a very practical level, Section 24 gives SEBI the power to regulate:
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the issue of securities, and
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the transfer of securities
for companies that are listed or intend to list on a recognised stock exchange.
This means whenever shares are issued to the public, or transferred in a regulated market, SEBI’s rules, guidelines, and approvals apply.
Companies don’t get to improvise here.
SEBI’s Powers Under Section 24
Section 24 doesn’t leave room for ambiguity.
SEBI has the authority to:
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monitor how shares are issued
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ensure proper disclosures are made
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enforce timelines and compliance
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intervene if irregularities are found
If something doesn’t add up, SEBI can step in. Pause the process. Ask questions. Impose penalties.
That’s the safety net for investors.
Authority Comes With Responsibility
This section doesn’t just give power. It also defines responsibility.
SEBI is expected to:
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protect investor interests
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maintain market integrity
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prevent manipulation and fraud
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ensure transparency in public issues
Section 24 provides the legal backing SEBI needs to issue regulations, circulars, and enforcement actions. And companies are legally bound to follow them.
What This Means for Directors
This part is often overlooked.
Section 24 indirectly ties director accountability to securities compliance.
Directors are expected to:
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ensure disclosures are accurate
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oversee compliance with SEBI norms
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prevent misleading information during share issues
If things go wrong, responsibility doesn’t stop at the company level. Directors can be questioned for lapses.
This creates internal discipline, not just external regulation.
Why Section 24 Is Critical for Listed Companies
For listed companies, Section 24 is not optional reading.
It governs:
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IPOs
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follow-on public offers
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rights issues
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share transfers in the market
Every move involving securities must align with SEBI regulations. Any deviation invites scrutiny.
This is what keeps markets orderly and credible.
A Simple Practical Example
Suppose a company plans to issue fresh shares to raise capital.
Without regulation, there would be room for manipulation — selective disclosures, unfair pricing, or insider advantage.
Section 24 ensures that:
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SEBI reviews the process
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disclosures are standardised
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investors get accurate information
If something looks off, SEBI can step in before damage is done.
Why Investors Benefit From Section 24
Most investors don’t read company law sections. And they shouldn’t have to.
Section 24 exists so investors can rely on the system rather than individual promises. It ensures:
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fair treatment
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transparency
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regulatory oversight
That’s why investor confidence survives even when markets fluctuate.
Common Misunderstanding Around Section 24
Many people assume the Companies Act alone governs listed companies.
That’s not true.
Once a company is listed, SEBI regulations take priority for securities-related matters. Section 24 is the bridge that makes this transition legally clear.
Key Things to Keep in Mind
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Section 24 gives SEBI control over issue and transfer of securities
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It applies to listed and to-be-listed companies
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Directors are accountable for compliance
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SEBI has enforcement powers, not just advisory role
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Investor protection is the core objective
Final Thoughts
Section 24 of the Companies Act, 2013 is not just a legal provision. It’s a handover of responsibility.
It tells companies: once you step into public markets, you play by stricter rules.
And it tells investors: there is a regulator watching.
That balance is what keeps India’s securities market functioning with credibility.
If you’re planning a listing, issuing shares, or handling compliance for a listed company, understanding Section 24 is essential. Mistakes here can be expensive.
For expert guidance on SEBI compliance, securities regulations, and company law matters, connect with professionals at Callmyca.com and ensure every step is legally sound and regulator-ready.
