# What is a 'Security'? Section 2(81)

Section 2(81) of the Companies Act borrows its definition from Section 2(h) of the Securities Contracts (Regulation) Act, 1956 (SCRA).

## Inclusions - Securities include:

### (a) Marketable Securities Issued by a Company

Shares
Scripts
Stocks
Bonds
Debentures
Debenture stock
Other marketable securities of a like nature

Issued by any incorporated company or body corporate.

### Other Inclusions

| (i) | Derivatives |

| (ii) | Units/instruments issued by collective investment schemes |

| (iii) | Security receipts under SARFAESI Act, 2002 |

| (iv) | Units of mutual funds or similar instruments |

### (b) Government Securities + any other instrument declared by CG to be a security.

## Critical EXCLUSION: ULIPs

> Securities do NOT include any Unit-Linked Insurance Policy (ULIP) or any scrip/instrument/unit that combines insurance risk on life + investment, issued by an insurer under the Insurance Act, 1938.

## (vi) Special Inclusion - Securitisation Instruments

Any certificate or instrument issued to an investor by a special purpose distinct entity (SPDE) holding debt, receivable, or mortgage debt assigned to it — acknowledging beneficial interest of the investor.

## Side Note - Overseas Direct Listing vs ADR/GDR

Aspect	Direct Listing	ADR/GDR
Intermediary	None	Foreign depository bank
Cost	Lower	Higher (depository fees)
Transparency	Higher	Lower (one layer between)
Mechanism	Domestic company directly lists on foreign stock exchange	Indian company gives shares to foreign depository, which issues receipts

## Memory Aid

Securities = traditional capital market instruments + government securities + derivatives + MF/CIS units + securitisation receipts
ULIP is NOT a security (it's an insurance product).

Worked example

### Example 1

Example: ABC Ltd issues 9% non-convertible debentures. These are 'securities' under Section 2(81) (covered by 'debentures').

### Example 2

Example: A unit-linked insurance policy from XYZ Insurance Co is purchased — this is NOT a security; it is an insurance product specifically excluded.

### Example 3

Example: A mutual fund issues units under its equity scheme. These ARE securities (clause iv).

⚠️ Common exam mistakes

Including ULIPs as securities — they are explicitly excluded.
Forgetting that derivatives and securitisation receipts are included.
Missing that the definition is borrowed from SCRA, 1956 — not given afresh in the Companies Act.

Bare-Act text Section 2(81) of Companies Act / Section 2(h) of SCRA · Companies Act, 2013 read with Securities Contracts (Regulation) Act, 1956 · click to expand

Section 2(81): 'Securities' means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956. Section 2(h) of SCRA: 'Securities' include - (i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; (ia) derivative; (ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes; (ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (id) units or any other such instrument issued to the investors under any mutual fund scheme; (ii) Government securities; (iia) such other instruments as may be declared by the Central Government to be securities; and (iii) rights or interest in securities.

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Definition of Securities - Section 2(81)

Worked example

⚠️ Common exam mistakes