THE COMPANIES ACT, 2013

Companies Act vs SEBI & LODR

Statutory Interfaces — Listed Companies' Dual Compliance

— Two regulators, one listed company —

Companies Act, 2013 vs SEBI Act, 1992 and SEBI LODR Regulations, 2015 — The Dual-Compliance Architecture

Introduction

Indian listed companies operate under a unique dual-compliance architecture. They are simultaneously creatures of the Companies Act, 2013 (the foundational corporate-law statute) and subjects of the Securities and Exchange Board of India Act, 1992 read with the Securities Contracts (Regulation) Act, 1956, the various SEBI Regulations, and most importantly the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations). The Companies Act provides the corporate-existence and governance framework — incorporation, share capital, directors, accounts, audit, meetings, transactions, and restructuring. The SEBI framework regulates the listing-and-trading dimension — public-market disclosures, shareholder protection in capital-market transactions, prevention of fraud and insider trading, takeover and substantial-acquisition rules, and continuous-disclosure obligations to the stock exchanges and the investing public.

These two regimes are not parallel and independent — they interlock at multiple points. Where they coincide, listed companies must comply with the stricter requirement. Where they conflict, the resolution requires careful analysis of the regulatory hierarchy, the doctrine of harmonious construction, and specific provisions like Section 24 of the Companies Act (which gives SEBI exclusive jurisdiction over public-issue and listed-company matters in certain respects). Understanding the interaction is essential because virtually every major corporate transaction — IPOs, rights issues, preferential allotments, schemes of merger, related-party transactions, buy-backs, takeovers — must navigate both statutory regimes and their respective rules and regulations.

This article examines the interaction between the Companies Act, 2013 and the SEBI framework — beginning with the statutory architecture and the constitutional foundation of SEBI's powers, then mapping the major points of overlap (governance, disclosures, RPTs, schemes, M&A, capital-raising), examining Section 24 of the Companies Act and SEBI's exclusive jurisdiction, surveying the principal SEBI regulations that overlay the Companies Act, and finally addressing the case law on jurisdictional conflict and harmonisation. It is an essential topic for the judicial aspirant because the Companies Act-SEBI interface generates rich examination questions on doctrine, jurisdiction, and contemporary commercial law.

Part I — The SEBI Framework

SEBI Act, 1992 — Constitutional and Statutory Foundation

The Securities and Exchange Board of India Act, 1992, established SEBI as the statutory regulator for the Indian securities market. SEBI was originally constituted as a non-statutory advisory body in 1988 and elevated to statutory status by the 1992 Act. The objective enshrined in the preamble is to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market. Key powers include:

• Section 11 — broad regulatory powers including to regulate the business of stock exchanges, securities markets, intermediaries, and listed entities;
• Section 11A — power to regulate disclosure and investor-protection matters;
• Section 11B — power to issue directions to persons associated with the securities market;
• Section 11C — power to investigate;
• Section 12A — prohibition on manipulative and deceptive devices, insider trading, and substantial-acquisition fraud;
• Section 15A through 15HB — adjudication and penalty powers;
• Section 30 — power to make regulations.

Securities Contracts (Regulation) Act, 1956 (SCRA)

The SCRA regulates contracts in securities and the listing/trading process. Listed companies are subject to:

• Section 21 — listing of securities to be in conformity with the listing agreement and SEBI rules;
• Section 21A — power of SEBI to delist securities for non-compliance;
• Securities Contracts (Regulation) Rules, 1957 — including Rule 19 (minimum public shareholding) and Rule 19A (continuous minimum public shareholding requirement).

Major SEBI Regulations Affecting Listed Companies

1. SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) — the principal listed-company compliance regulation; replaces the older Listing Agreement;SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Code) — open offers, change of control;SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) — UPSI definition, trading window, code of conduct, structured digital database;SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) — IPOs, FPOs, rights issues, QIPs, preferential allotments to listed entities;SEBI (Buy-Back of Securities) Regulations, 2018 — listed-company buy-back framework;SEBI (Delisting of Equity Shares) Regulations, 2021 — voluntary and compulsory delisting;SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 — ESOP, sweat equity for listed companies;SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 — debt instruments;SEBI (Mutual Funds) Regulations — for mutual funds;SEBI (Alternative Investment Funds) Regulations — for AIFs;SEBI (Foreign Portfolio Investors) Regulations — for FPIs.

Part II — Statutory Hierarchy and Section 24 of the Companies Act

Section 24 — SEBI's Exclusive Jurisdiction

Section 24 of the Companies Act, 2013, is the cornerstone provision allocating jurisdiction between SEBI and the Central Government/MCA in matters relating to the securities of listed companies and companies intending to list. Section 24 provides:

• '(1) The provisions contained in this Chapter [Chapter III: Prospectus and Allotment of Securities], Chapter IV [Share Capital and Debentures] and in section 127 [Punishment for failure to distribute dividends] shall, in so far as they relate to —
• (a) issue and transfer of securities; and
• (b) non-payment of dividend, by listed companies or those companies which intend to get their securities listed on any recognised stock exchange in India, except as provided under this Act, be administered by the Securities and Exchange Board by making regulations in this behalf.'
• '(2) All other powers relating to all other matters including the matters relating to prospectus, statement in lieu of prospectus, return of allotment, issue of shares and redemption of irredeemable preference shares shall be exercised by the Tribunal, the Central Government or the Registrar, as the case may be...'

In effect, Section 24 creates a clean division: SEBI administers the issue and transfer of securities and dividend non-payment for listed companies; the Tribunal/Central Government/ROC administers the residual matters (returns of allotment, prospectus filing, etc.).

Practical Effect of Section 24

Several practical consequences flow from Section 24:

• Listed-company IPO disclosures — SEBI's ICDR Regulations operate; Companies Act prospectus requirements (Sections 26-31) are subordinate to SEBI's framework;
• Listed-company rights issues — SEBI ICDR rights-issue framework; Section 62 Companies Act subordinate;
• Listed-company QIPs and preferential allotments — SEBI ICDR Chapters; Section 42 (private placement) and Section 62 subordinate;
• Listed-company share transfer — SEBI's depository and listing framework; demat-only share trading;
• Dividend non-payment — Section 127 enforcement is by SEBI for listed companies.

The 'Whichever is Stricter' Principle

Where the Companies Act and SEBI Regulations both apply (e.g., on a topic like related-party transactions or audit committees), the principle is generally that the listed company must comply with whichever is stricter. This 'higher-water-mark' approach ensures that listed-company protections are not diluted by reference to the Companies Act minimum. SEBI LODR Regulation 5 explicitly provides that nothing in LODR shall reduce protections under the Companies Act or other applicable laws.

Part III — SEBI LODR Regulations, 2015 — Comprehensive Overlay

Structure and Architecture of LODR

The SEBI LODR Regulations, 2015, are structured into ten chapters:

• Chapter I — Preliminary;
• Chapter II — Principles Governing Disclosures and Obligations of Listed Entities (Regulations 4-6);
• Chapter III — Common Obligations of Listed Entities (Regulations 7-15);
• Chapter IV — Obligations of Listed Entity for Specified Securities (Regulations 16-30) — equity-listed companies;
• Chapter V — Obligations of Listed Entity for Non-Convertible Securities (Regulations 31-62) — debt-listed entities;
• Chapter VI — Obligations for Indian Depository Receipts;
• Chapter VII — Obligations for Securitised Debt Instruments;
• Chapter VIII — Obligations for Mutual Fund Units;
• Chapter IX — Continuing Disclosure Requirements (Schedule III);
• Chapter X — Miscellaneous (penalties, powers, transitional).

Chapter IV — The Heart of Equity LODR

Regulations 16-30 are the core compliance framework for listed equity entities and overlap heavily with the Companies Act:

• Regulation 16 — definitions including 'related party' and 'material related party transactions';
• Regulation 17 — Board of Directors composition (1/3rd independent directors with non-executive chair, 1/2 independent directors with executive chair; women director; minimum 6 board meetings per year);
• Regulation 18 — Audit Committee (composition, meetings, terms of reference);
• Regulation 19 — Nomination and Remuneration Committee;
• Regulation 20 — Stakeholders Relationship Committee;
• Regulation 21 — Risk Management Committee;
• Regulation 22 — Vigil Mechanism / Whistle-Blower Policy;
• Regulation 23 — Related Party Transactions (definitions, approvals, omnibus, materiality, audit committee approval, shareholder approval for material RPTs);
• Regulation 24 — Subsidiary governance and material subsidiary obligations;
• Regulation 25 — Independent Directors (tenure, separation meetings, performance evaluation);
• Regulation 26 — Board membership and other obligations;
• Regulation 27 — Reporting to stock exchanges (quarterly reports);
• Regulation 28-29 — In-principle approvals;
• Regulation 30 — DISCLOSURE OF MATERIAL EVENTS — Schedule III continuous-disclosure framework;
• Regulations 33-34 — financial-results disclosure (quarterly), annual report contents.

Schedule III — Continuous Disclosure

Schedule III to LODR specifies events deemed to be 'material' and requiring disclosure to stock exchanges. Categorised as:

• Para A — events deemed material (mandatory disclosure regardless of materiality assessment) — e.g., acquisition/sale of assets, financial results, board changes, ratings changes, capital raising;
• Para B — events for which materiality must be assessed by the company under its policy on materiality — e.g., commercial agreements, regulatory orders, awards/orders;
• Specified timeline for disclosure — typically as soon as reasonably possible, normally within 24 hours of decision/event/intimation.

Schedule III continuous-disclosure obligations are largely additional to (not duplicative of) the Companies Act. The Companies Act requires Board's Report disclosures (annual) under Section 134 and AGM/EGM resolutions filing under Section 117 — but does not require the real-time event-driven disclosure that Schedule III mandates.

Part IV — Specific Areas of Overlap

Corporate Governance — Section 149/177/178 vs LODR Regulations 17-22

Both regimes mandate Board composition and committee structures. Comparison:

On most aspects, LODR is stricter; LODR-listed entities must satisfy LODR. On non-listed-but-large public companies, Companies Act applies. Listed companies must comply with both — meaning satisfying the stricter LODR standard.

Related Party Transactions — Section 188 vs LODR Regulation 23

RPTs are a major overlap area:

Listed companies must comply with whichever is stricter — typically LODR Reg 23 for materiality thresholds and shareholder-vote rules; both for definitional coverage.

Schemes of Arrangement — Sections 230-232 vs LODR Regulation 11 + SEBI Master Circular

Schemes of arrangement involving listed companies undergo dual approval:

• NCLT under Sections 230-232 — court-approved scheme;
• SEBI under Regulation 11 of LODR + SEBI Master Circular for Schemes of Arrangement (latest June 2023, periodically updated);
• Stock exchange clearance ('No Objection Letter') prior to NCLT filing;
• Specific shareholding/swap-ratio/disclosure requirements for listed-listed and listed-unlisted schemes;
• Public shareholders' approval through e-voting (majority of public shareholders in addition to overall 75% special resolution under Section 230).

This dual-approval architecture means listed-company schemes face significantly more procedural complexity than purely unlisted-company schemes.

Insider Trading — Section 195 (omitted) and PIT Regulations

Section 195 of the Companies Act, 2013, originally prohibited insider trading, but was OMITTED by the Companies (Amendment) Act, 2017, recognising that SEBI's PIT Regulations comprehensively occupy the field. The current framework:

• SEBI PIT Regulations, 2015 (as amended) — applicable to all listed and proposed-to-be-listed entities;
• Definition of 'Unpublished Price Sensitive Information' (UPSI);
• Trading window concept;
• Code of conduct for designated persons;
• Structured Digital Database (SDD) for sharing of UPSI;
• Penalties under SEBI Act Section 15G — disgorgement, monetary penalty, ban from market;
• Insider Trading Informant Mechanism (since 2019) — bounty up to 10% of recovered amount, max ₹10 cr.

Substantial Acquisition and Takeovers

The SEBI Takeover Regulations, 2011 govern substantial acquisitions and takeovers of listed companies. Key thresholds:

• Initial trigger: acquisition of 25% or more shares/voting rights (Reg 3) — open offer for 26% additional;
• Creeping acquisition: more than 5% in a financial year by acquirer with 25-75% holding (Reg 4);
• Indirect acquisition triggers under Reg 5;
• Exemptions under Reg 10 (inter-se promoter transfers, court-approved schemes, etc.);
• Post-acquisition compliance, public announcement, and offer-period restrictions.

These triggers operate concurrently with Companies Act provisions on transfer of shares, disclosures of beneficial ownership (Sections 89-90), and merger schemes (Sections 230-232). Coordination among these requirements is essential.

Disclosure Architecture

Part V — IPO and Public-Issue Process

Listed-Company IPOs Operate under SEBI ICDR

Per Section 24, SEBI's ICDR Regulations are the operative framework for IPOs and listed-company capital-raising. The Companies Act prospectus framework (Sections 26-31, Sections 35-36) operates as a baseline; SEBI's ICDR adds:

• Eligibility norms (3 years' track record, profit-history requirements, or alternative routes);
• Detailed disclosure requirements in the offer document;
• Lead manager (BRLM) due diligence and certification;
• Anchor investor allocations;
• Allocation rules — QIB, NII, Retail (sub-categorised);
• Price discovery mechanisms (book-building / fixed price);
• Lock-in requirements for promoters and pre-IPO investors;
• Minimum public shareholding (25%) and post-IPO compliance;
• IPO grading (originally mandatory, now voluntary).

Continuing Public-Issue Compliance

Post-IPO, the listed entity must continuously satisfy LODR. Failure to do so may trigger:

• LODR penalties under Reg 98 — fines, suspension of trading, liability of officers;
• SEBI proceedings under SEBI Act Sections 11, 11B for directions;
• Adjudication and penalty under Sections 15A-15HB of SEBI Act;
• Compulsory delisting under SCRA Section 21A — for repeated material non-compliance;
• Action under SEBI's Designated Professional Service Provider (DPSP) for major violations.

Part VI — Notable Case Law

Constitutional and Foundational

Section 24 and SEBI's Exclusive Jurisdiction

Disclosure Obligations

Insider Trading Jurisdiction

Schemes of Arrangement

Takeover Code

Substantial Beneficial Ownership

Part VII — Practical Illustrations

Illustration 1 — Listed-Company Audit Committee

Pacific Cement Ltd., a listed company with executive Chairman, has an Audit Committee with 3 members — 1 independent director, 1 non-executive director (promoter group), and 1 executive director (CFO). Issue: Compliance? Held: NON-COMPLIANT. LODR Regulation 18(1) requires (a) min 3 directors, (b) two-thirds independent, (c) all financially literate, (d) chair shall be an independent director. Here only 1 of 3 is independent (33%), failing the 2/3 test. Section 177 Companies Act requires only 'majority' independent — here Pacific is non-compliant under both. Need to add another independent director (replacing one of the non-IDs) and ensure ID chair.

Illustration 2 — RPT Approval

Stellar Industries Ltd. (listed) proposes to enter a sale-of-services agreement with its 60% subsidiary Stellar Logistics Pvt. Ltd. for ₹1,200 crores annually. Stellar's consolidated turnover is ₹8,500 crores. Issue: What approvals required? Held: Material RPT under both regimes. Material under LODR Reg 23(1) — value of ₹1,200 cr exceeds ₹1,000 cr (the lower of ₹1,000 cr or 10% of ₹8,500 cr = ₹850 cr). The transaction also exceeds Sec 188 thresholds. Required: (a) Audit Committee approval; (b) Board approval; (c) Shareholder approval by special resolution under Sec 188 AND LODR Reg 23 (with related parties — including Stellar Logistics' shareholding stake — abstaining); (d) Disclosure under Reg 23(9) and AOC-2.

Illustration 3 — Disclosure Materiality

Vijay Energy Ltd. (listed) is awarded a major contract by NTPC for ₹450 crores over 5 years. Vijay's annual turnover is ₹3,200 crores. Issue: Is disclosure required? Held: Yes — material event under LODR Schedule III Para B (commercial agreement, materiality assessed under company's policy). The contract value (annualised ₹90 cr per year — ~3% of turnover) is borderline; many companies define materiality as 10% of turnover; Vijay's policy may treat 5%+ as material. In practice, prudent disclosure within 24 hours is recommended. Companies Act has no equivalent real-time disclosure obligation — only Sec 117 filing for special resolutions and Sec 134 annual report disclosures.

Illustration 4 — Scheme of Arrangement

Krishna Holdings Ltd. (listed parent) proposes a demerger of its FMCG business into a separate listed entity Krishna FMCG Ltd. Issue: Approval pathway? Held: Dual approval. (a) NCLT under Sections 230-232 — meeting of shareholders/creditors, NCLT sanction, share-issue arrangements; (b) SEBI under Reg 11 LODR + SEBI Master Circular for Schemes of Arrangement — stock exchange No Objection Letter ('NOL') with prescribed conditions, e-voting by public shareholders (separate threshold of majority of public shareholders), disclosure document with detailed rationale, swap-ratio justification by independent valuer, audit committee report, listing of resulting entity per ICDR. Any conflict between conditions resolved in favour of SEBI's stricter terms. The dual-approval requirement makes listed-company schemes significantly more time-consuming than unlisted-company schemes.

Illustration 5 — Insider Trading

Vinod, the CFO of Solar Tech Ltd. (listed), purchases 5,000 shares of Solar Tech 4 days before the Board meeting that approved a 30% revenue beat. Issue: Liability? Held: Insider trading violation. Vinod is a 'designated person' with access to UPSI (revenue-related projections). Trading during a closed window is prohibited under PIT Regulations + company's code of conduct. Penalties: (a) Section 15G of SEBI Act — monetary penalty up to ₹25 cr or 3x profit, whichever higher; (b) Disgorgement of profits; (c) Trading ban; (d) Possible criminal action under Section 24 of SEBI Act + applicable IPC/BNS provisions. Companies Act Section 195 (now omitted) is no longer applicable — SEBI PIT Regulations occupy the field exclusively.

Part VIII — Penalty Architecture

Companies Act Penalties

• Section 134(8) — failure of Board's Report compliance — fine on company and officer in default;
• Section 188(5) — RPT contravention — recovery of unaccounted benefit + penalty;
• Section 447 — fraud — imprisonment 6 months-10 years + fine;
• Various other section-specific penalties.

SEBI Penalties

• Section 15A — failure to furnish information — up to ₹1 lakh per day, max ₹1 cr;
• Section 15B — failure of intermediaries — up to ₹1 lakh per day, max ₹1 cr;
• Section 15G — insider trading — up to ₹25 cr or 3x profit, whichever higher;
• Section 15HA — fraud and unfair trade practices — up to ₹25 cr or 3x profit, whichever higher;
• Section 15HB — residual penalty — up to ₹1 cr;
• Section 24 — criminal liability — up to 10 years imprisonment + fine for serious violations;
• LODR Reg 98 — penalty for non-compliance — fine + suspension of trading.

Part IX — Recent Developments

LODR Amendments

LODR has been amended significantly multiple times since 2015:

• April 2022 — RPT amendments — material RPT threshold lowered to ₹1,000 cr; promoter group with ≥20% included in 'related party'; further restrictions on RPT voting;
• June 2023 — Schemes of Arrangement Master Circular consolidated — clearer rules on listed-company schemes;
• Various amendments on continuous disclosure (Schedule III), Risk Management Committee, ESG/BRSR (Business Responsibility and Sustainability Reporting), Director nomination disclosures, and others;
• Top 1000 entities — extended Risk Management Committee, ID woman director, BRSR mandatory.

BRSR — Business Responsibility and Sustainability Reporting

SEBI introduced the BRSR framework, mandatory for top 1000 listed entities by market capitalisation from FY 2022-23 onwards. BRSR replaces the older Business Responsibility Report (BRR) and aligns with global ESG frameworks. It captures performance on 9 principles drawn from National Guidelines on Responsible Business Conduct. The Companies Act has no equivalent — BRSR is a SEBI-specific overlay.

PIT Amendments

PIT Regulations have been amended several times since 2015:

• 2018 amendments — definition of 'connected person' broadened, designated persons categorisation;
• 2019 amendments — Informant Mechanism (bounty), Structured Digital Database, code of conduct enhancements;
• 2022 amendments — modifications on UPSI definition, trading-plan-pre-clearance procedures.

Listing Norms Reform

Various reforms to listing norms:

• Minimum Public Shareholding (MPS) — 25% requirement; recent guidance on time-bound compliance;
• Promoter classification — refinements on identification and reclassification;
• New listing platforms — Innovators Growth Platform (IGP), SME platforms;
• REITs and InvITs — separate frameworks under SEBI.

Part X — Critical Evaluation

Strengths of the Dual Architecture

• Clear allocation of jurisdiction under Section 24;
• SEBI's specialised expertise in capital-market matters;
• LODR's continuous-disclosure framework adds real-time transparency beyond annual Companies Act reporting;
• 'Stricter applies' principle prevents dilution of investor protection;
• Specialised forums (SAT for SEBI, NCLT for Companies Act) with specific expertise;
• Coordination through MCA-SEBI-RBI consultations and joint-committee mechanisms.

Weaknesses and Reform Needs

• Dual compliance increases procedural complexity and cost — particularly for transactions like schemes of arrangement;
• Concurrent jurisdiction can lead to forum-shopping or simultaneous proceedings;
• Some boundary issues remain — e.g., when does NCLT or SEBI have primary jurisdiction in specific cases;
• RPT framework — recent amendments have increased complexity; thresholds not always intuitive;
• Disclosure overlap — Companies Act and LODR sometimes require similar but slightly different disclosures, creating compliance burden;
• Penalty architecture — different forums for civil/criminal/regulatory penalties can result in multiple proceedings;
• Smaller listed companies bear disproportionate compliance cost relative to their size.

Part XI — Exam-Focused Summary

Part XII — Conclusion

The relationship between the Companies Act, 2013 and the SEBI framework is the defining feature of the regulatory environment for listed companies in India. The Companies Act provides the foundational corporate-existence and governance architecture; the SEBI framework — anchored in the SEBI Act, 1992, SCRA, 1956, and the various SEBI Regulations including LODR — adds the listing-specific overlay aimed at investor protection and capital-market integrity. Section 24 of the Companies Act creates a clean jurisdictional division for issue/transfer of securities and dividend non-payment, vesting these in SEBI; for everything else, listed companies must comply with the stricter of the two regimes. This dual-compliance architecture — while procedurally complex — has produced one of the most robust investor-protection frameworks among emerging markets.

The interaction at the level of specific topics — Board composition, RPTs, schemes of arrangement, IPOs, takeovers, insider trading, continuous disclosure — illustrates how the two regimes simultaneously cooperate (each strengthening the other) and create complexity (each requiring separate analysis). The Supreme Court's jurisprudence — Sahara, Daiichi Sankyo, and many others — has progressively clarified the boundary, vindicated SEBI's expansive role, and harmonised the two regimes. Recent reforms — LODR amendments on RPTs, BRSR/ESG framework, PIT enhancements, scheme master circulars — continue to refine the dual-compliance architecture.

For the judicial aspirant, this interface is heavily examined. Key topics include: Section 24's jurisdictional allocation; the LODR's principal chapters (Reg 17-30); the comparative framework on Board composition, committees, RPTs, schemes; the omission of Section 195 and PIT's exclusive insider trading jurisdiction; the dual penalty architecture; and major cases including Sahara, Saikala Associates, Daiichi Sankyo, and Wipro. As Indian capital markets continue to deepen and the regulatory framework continues to evolve, mastery of the Companies-SEBI interface remains a high-yield area for examinations and a foundational competence for commercial-law practice.