Capital Market and Securities Laws · Securities and Exchange Board of India

Establishment and Incorporation of SEBI under Section 3 of the SEBI Act

Updated 11 October 2026 · Fact-checked

Section 3 of the SEBI Act, 1992 establishes the Securities and Exchange Board of India from a date the Central Government notifies. The Board is a body corporate with perpetual succession and a common seal. It can hold and dispose of property, contract, and sue or be sued. Its head office is at Bombay.

Understand Establishment and Incorporation of SEBI

Section 3 is the section that creates SEBI as a legal entity. Without it, SEBI would only be a name. The section gives it a legal personality, so it can act in its own name and not through its members.

The Board is established with effect from such date as the Central Government may, by notification, appoint. So the Central Government fixes the date through a notification. The Act as a whole is deemed to have come into force on 30 January 1992, but the Board's establishment follows the notified date.

Section 3(2) makes the Board a body corporate by the name Securities and Exchange Board of India. Three features follow. Perpetual succession means the Board continues even when its Chairman or members change. A common seal is the official signature of the body, used to authenticate its documents. It can acquire, hold and dispose of property, both movable and immovable, and contract. It can sue or be sued in its own name. All of this is subject to the provisions of the Act.

Section 3(3) says the head office of the Board shall be at Bombay. Section 3(4) says the Board may establish offices at other places in India. The Act uses the name Bombay, so use that name in your answer. You may add that this is the present Mumbai.

This topic links to other provisions. Section 10 transfers the assets and liabilities of the existing Securities and Exchange Board to the new Board. Section 17 allows the Central Government to supersede the Board, which is possible only because the Board is a statutory body created by the Act.

Key rules to remember

Establishment: Board established by Central Government notification, from the date it appoints (Section 3(1)); The Board is created for the purposes of this Act under the name Securities and Exchange Board of India.
Legal status: Body corporate = perpetual succession + common seal (Section 3(2)); Remember these two features first. They are the usual question.
Powers as a body corporate: Acquire, hold and dispose of property (movable and immovable) + contract + sue or be sued (Section 3(2)); These powers are subject to the provisions of the Act.
Head office: Head office at Bombay (Section 3(3)); The Act names Bombay.
Other offices: Board may establish offices at other places in India (Section 3(4)); The word is 'may'. Other offices are optional.

How to solve Establishment and Incorporation of SEBI questions

Use this method for any question on how SEBI is established or what its legal status means.

1Identify what is asked: establishment, legal status, powers, or office location.
2State Section 3(1): the Board is established by the Central Government by notification, from the date it appoints.
3State Section 3(2): it is a body corporate with perpetual succession and a common seal.
4Explain each term in one line. Say what perpetual succession and common seal mean.
5List the powers: hold and dispose of property, contract, sue or be sued, subject to the Act.
6Add Section 3(3) and 3(4): head office at Bombay, other offices at other places in India.
7If the question has facts, apply them. For example, a change of Chairman does not end the Board.
8Close with a clear conclusion that names the section.

Quickest way: The 3-2-1 recall

When to use it: Use this when you have only a few minutes for a short-note or 5-mark question.

Think of the four sub-sections as: when, what, where, more.
Sub-section (1) is when: established by notification of the Central Government.
Sub-section (2) is what: body corporate, perpetual succession, common seal, property, contract, sue or be sued.
Sub-sections (3) and (4) are where: head office at Bombay, other offices anywhere in India.
Write the section number against each point and end with a one-line conclusion.

Common mistakes in Establishment and Incorporation of SEBI

Saying SEBI was established directly by the Act on a fixed date.
Students link establishment with the Act's commencement date.
Fix: Write that the Board is established from the date the Central Government appoints by notification under Section 3(1).
Writing that the head office is at Mumbai only, or naming another city.
Students use the present name from daily life.
Fix: Quote the Act: head office at Bombay. You may add that it is now Mumbai.
Treating other offices as compulsory.
Students know SEBI has regional offices and assume the Act requires them.
Fix: Section 3(4) says the Board may establish offices at other places in India. It is a power, not a duty.
Explaining perpetual succession as a fixed term for the Chairman.
The word succession is confused with tenure.
Fix: Perpetual succession means the Board continues despite changes in its members. Tenure of members is dealt with separately under Section 5.
Leaving out the words 'subject to the provisions of this Act'.
Students memorise the powers and skip the condition.
Fix: State that the property and contract powers are exercised subject to the Act.

Worked examples

Example 1

Explain how the Securities and Exchange Board of India is established and state its legal status under the SEBI Act, 1992.

Show the solution

Provision: Section 3(1) provides that the Board is established for the purposes of the Act by the name Securities and Exchange Board of India, with effect from the date the Central Government appoints by notification.
Section 3(2) makes the Board a body corporate.
Features: it has perpetual succession, so it continues despite changes in its members. It has a common seal.
Powers: subject to the Act, it can acquire, hold and dispose of property, movable and immovable, and contract. It sues or is sued in its own name.
Offices: the head office is at Bombay under Section 3(3). Under Section 3(4) it may set up offices at other places in India.

Answer: SEBI is a statutory body established by Central Government notification under Section 3(1). It is a body corporate with perpetual succession and a common seal, can hold property, contract, and sue or be sued in its own name, and has its head office at Bombay.

Example 2

A person wants to file a suit for recovery of dues against SEBI, and asks who should be named as the defendant, since the Chairman has recently changed. Advise with reference to the SEBI Act, 1992.

Show the solution

Provision: under Section 3(2), the Board is a body corporate by the name Securities and Exchange Board of India and shall sue or be sued by that name.
Analysis: the Board is a separate legal person. It has perpetual succession, so it continues unaffected by a change in Chairman or members.
The suit therefore lies against the Board in its own name, not against the individual Chairman.
Conclusion: the defendant is the Securities and Exchange Board of India. The change of Chairman does not affect the suit.

Answer: The suit should be filed against the Securities and Exchange Board of India by that name under Section 3(2). Its perpetual succession means a change of Chairman does not affect the proceedings.

Exam tips

Write the section number with every point. ICSI-style answers expect the provision cited.
Learn the features of a body corporate as a list: perpetual succession, common seal, property, contract, sue or be sued.
Use the exact words 'Bombay' for the head office, and add 'now Mumbai' only as a note.
For application questions, state the provision first, then the facts, then a one-line conclusion.
Link Section 3 briefly to Section 10 (transfer of assets) and Section 17 (supersession) if the question is broad.

Practice questions from Securities and Exchange Board of India

Establishment and Incorporation of SEBI in other exams

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

Establishment and Incorporation of SEBI: frequently asked questions

What does Section 3 of the SEBI Act, 1992 say?

It establishes the Securities and Exchange Board of India from a date notified by the Central Government. It makes the Board a body corporate with perpetual succession and a common seal. It also fixes the head office at Bombay and allows other offices in India.

What is perpetual succession in the case of SEBI?

It means the Board has a continuous existence. Changes in the Chairman or members do not end the Board or its rights and liabilities. It remains the same legal person.

Where is SEBI's head office under the Act?

Section 3(3) says the head office of the Board shall be at Bombay. Section 3(4) lets the Board set up offices at other places in India.

Can SEBI own property and enter contracts?

Yes. Under Section 3(2), the Board can acquire, hold and dispose of movable and immovable property and can contract. It does so subject to the provisions of the Act.