Capital Market and Securities Laws · Issue and Listing of Non-Convertible Securities

Non-Convertible Securities and the SEBI NCS Regulations, 2021

Updated 11 October 2026 · Fact-checked

Non-convertible securities are debt or preference instruments, such as debentures, NCRPS and green debt securities, that cannot be converted into equity shares. The SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 govern their issue and listing. SEBI's power comes from Section 24 of the Companies Act, 2013 read with Section 11A of the SEBI Act.

Understand Overview of Non-Convertible Securities and NCS Regulations

A non-convertible security is an instrument that a company issues to raise money and that the holder cannot convert into equity shares. The holder either earns a return and gets money back, or holds a preference claim. Common examples are non-convertible debentures (NCDs), non-convertible redeemable preference shares (NCRPS) and green debt securities. Others include perpetual and other specialised debt instruments.

Compare this with a convertible instrument. A convertible debenture can later turn into equity, so the holder may share in future growth. A non-convertible instrument never does. The investor's return is fixed or defined, and the company's ownership is not diluted.

The SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (the NCS Regulations) set the rules for issuing these securities to the public, and for listing them on a stock exchange. Broadly, they cover public issue, private placement with listing, and the ongoing disclosure obligations of the issuer. You will study each of these in the next topics of this chapter. Here, you must know the instruments, the purpose of the Regulations and the source of SEBI's power.

That source is Section 24 of the Companies Act, 2013. Under Section 24(1)(a), the provisions of Chapter III (Prospectus and Allotment of Securities), Chapter IV (Share Capital and Debentures) and Section 127, in so far as they relate to (i) issue and transfer of securities and (ii) non-payment of dividend, by listed companies or companies that intend to get their securities listed on a recognised stock exchange in India, are administered by SEBI by making regulations. Under Section 24(1)(b), in any other case, the Central Government administers them.

The Explanation to Section 24(1) keeps some matters outside SEBI. Matters relating to prospectus, return of allotment, redemption of preference shares and any other matter specifically provided in the Act are exercised by the Central Government, the Tribunal or the Registrar, as the case may be. Under Section 24(2), SEBI uses its powers under Section 11(1), (2A), (3) and (4) and Sections 11A, 11B and 11D of the SEBI Act, 1992. Section 11A lets SEBI, for the protection of investors, specify by regulations the matters relating to issue of capital and transfer of securities, and how companies must disclose them.

Key rules to remember

Section 24(1)(a) - SEBI's domain: Listed companies or companies intending to list → issue and transfer of securities and non-payment of dividend → administered by SEBI through regulations; This applies to the provisions of Chapter III, Chapter IV and Section 127 of the Companies Act, 2013, except as provided under the Act.
Section 24(1)(b) - Central Government's domain: Any other case → administered by the Central Government; This covers unlisted companies with no intention to list.
Explanation to Section 24(1): Prospectus, return of allotment, redemption of preference shares and other matters specifically provided in the Act → Central Government, Tribunal or Registrar; Do not assign these to SEBI in an answer.
Section 24(2) - SEBI's powers: Section 11(1), (2A), (3), (4) + Sections 11A, 11B, 11D of the SEBI Act, 1992; Section 24(2) also refers to matters delegated to SEBI under the proviso to Section 458(1).
Section 11A(1) of the SEBI Act: Regulations on issue of capital, transfer of securities and their disclosure; orders prohibiting or conditioning prospectus, offer document or advertisement; SEBI acts for the protection of investors, without prejudice to the Companies Act, 1956 as the text reads.
Convertible vs non-convertible: Non-convertible security = cannot be converted into equity shares; Examples: NCD, NCRPS, green debt security.

How to solve Overview of Non-Convertible Securities and NCS Regulations questions

Use this method for any question on non-convertible securities, the NCS Regulations or SEBI's power under Section 24.

1Identify what is asked: meaning of the instrument, the Regulations, or SEBI's power.
2Define the instrument in one line and state that it cannot be converted into equity.
3Name the governing law: the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, and the Companies Act, 2013.
4For power questions, quote Section 24(1)(a): listed companies or companies intending to list, for issue and transfer of securities and non-payment of dividend, with SEBI acting through regulations.
5State the other side: in any other case, the Central Government administers (Section 24(1)(b)), and the Explanation keeps prospectus, return of allotment and redemption of preference shares with the Central Government, Tribunal or Registrar.
6Link to Section 24(2) and Section 11A of the SEBI Act for the source of SEBI's regulation-making power.
7Apply to the facts given: is the company listed or intending to list? What matter is involved?
8Close with a clear conclusion in one sentence.

Quickest way: Two-question test for who regulates

When to use it: Use this for short facts-based questions on whether SEBI or the Central Government regulates a matter.

Ask: is the company listed or intending to list its securities in India?
Ask: is the matter issue or transfer of securities, or non-payment of dividend?
If both answers are yes, SEBI acts through regulations under Section 24(1)(a).
If the company is not listed or not intending to list, the Central Government administers under Section 24(1)(b).
Check the Explanation: prospectus, return of allotment and redemption of preference shares stay with the Central Government, Tribunal or Registrar.

Common mistakes in Overview of Non-Convertible Securities and NCS Regulations

Saying SEBI regulates all companies' issue of securities.
Students remember Section 24 as 'SEBI power' and skip the condition.
Fix: State the condition: listed companies or companies intending to get securities listed. Other cases go to the Central Government.
Treating non-convertible debentures as convertible after a fixed period.
Students mix NCDs with convertible debentures from the Companies Act chapter.
Fix: Remember the name itself: non-convertible means never convertible into equity shares.
Giving SEBI power over prospectus and redemption of preference shares in all cases.
The Explanation to Section 24(1) is ignored.
Fix: Quote the Explanation: these matters are exercised by the Central Government, the Tribunal or the Registrar, as the case may be.
Omitting the SEBI Act link and citing only the Companies Act.
Students think Section 24 alone gives power.
Fix: Add that Section 24(2) lets SEBI use Section 11 and Sections 11A, 11B and 11D of the SEBI Act, 1992.
Confusing NCRPS with a debt instrument that repays on a fixed date as interest.
Both are non-convertible, so students treat them alike.
Fix: NCRPS is a preference share, not a debenture. It carries a preference right and is redeemable; a debenture is a debt instrument.
Writing the title of the Regulations loosely, such as 'SEBI Debt Regulations'.
Students rely on memory of short forms.
Fix: Write the full name: SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.

Worked examples

Example 1

Mehta Infra Limited, a company listed on a recognised stock exchange in India, wants to issue non-convertible debentures. Who administers the Companies Act provisions on issue and transfer of its securities, and how? Answer with reference to Section 24 of the Companies Act, 2013.

Show the solution

Provision: Section 24(1)(a) says that the provisions of Chapter III, Chapter IV and Section 127, in so far as they relate to issue and transfer of securities and non-payment of dividend by listed companies or those intending to list, are administered by SEBI by making regulations.
Facts: Mehta Infra Limited is listed, and NCDs are securities. The matter is issue of securities.
Analysis: The condition of being listed is met, so SEBI administers the provisions through regulations. For NCDs, the relevant regulations are the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
Limit: Matters such as prospectus, return of allotment and redemption of preference shares remain with the Central Government, Tribunal or Registrar under the Explanation to Section 24(1).

Answer: SEBI administers the issue and transfer provisions for Mehta Infra Limited by making regulations under Section 24(1)(a). The NCS Regulations, 2021 will govern the NCD issue. Matters in the Explanation remain with the Central Government, Tribunal or Registrar.

Example 2

Explain what non-convertible securities are, give three examples, and state how they differ from convertible debentures.

Show the solution

Meaning: A non-convertible security is an instrument issued by a company to raise funds that cannot be converted into equity shares.
Examples: non-convertible debentures, non-convertible redeemable preference shares (NCRPS) and green debt securities.
Difference: A convertible debenture can be converted into equity shares, so the holder may become a shareholder. A non-convertible security cannot, so the holder's position stays that of a debt holder or preference holder.
Regulation: Their issue and listing are governed by the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
Conclusion: The key test is the right to convert into equity.

Answer: Non-convertible securities cannot be converted into equity shares. Examples are NCDs, NCRPS and green debt securities. Convertible debentures can turn into equity, but these cannot. They are governed by the SEBI NCS Regulations, 2021.

Exam tips

Quote Section 24(1)(a) and (b) with their exact condition: listed or intending to list. Examiners reward this precision.
Always name the Regulations in full: SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
Use the answer pattern: provision, facts, analysis, conclusion. Write the conclusion as a separate line.
Mention the Explanation to Section 24(1) when a question involves prospectus, return of allotment or preference share redemption.
Learn three examples of non-convertible securities so you can list them in a short note.

Practice questions from Issue and Listing of Non-Convertible Securities

Overview of Non-Convertible Securities and NCS Regulations in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

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Overview of Non-Convertible Securities and NCS Regulations: frequently asked questions

What are non-convertible securities?

They are instruments such as debentures and redeemable preference shares that cannot be converted into equity shares. Green debt securities are also in this group. They are issued and listed under the SEBI NCS Regulations, 2021.

What does Section 24 of the Companies Act, 2013 do?

It gives SEBI the power to administer, by regulations, the provisions on issue and transfer of securities and non-payment of dividend for listed companies and those intending to list. In any other case, the Central Government administers them. Certain matters, like prospectus and return of allotment, stay with the Central Government, Tribunal or Registrar.

How is SEBI's power under Section 11A related to Section 24?

Section 24(2) says SEBI will use its powers under Sections 11A, 11B and 11D and parts of Section 11 of the SEBI Act. Section 11A lets SEBI specify by regulations the matters relating to issue of capital and transfer of securities. It also lets SEBI prohibit or set conditions for a prospectus, offer document or advertisement.

Is NCRPS a debenture?

No. NCRPS is a preference share that is redeemable and not convertible into equity. A debenture is a debt instrument. Both are non-convertible securities, but their legal nature differs.