Sebi seeks inclusion of fractional shares in Companies Amendment Bill
Panaji, Aug 24, 2026
Sebi has asked the Ministry of Corporate Affairs to recognise the issuance and holding of fractional shares, which could widen investment options for retail investors
The Securities and Exchange Board of India (Sebi) has asked the Ministry of Corporate Affairs (MCA) to recognise the issuance and holding of fractional shares in the Companies Amendment Bill, according to official sources.
A fractional share refers to a portion of a share less than one share unit. Fractional shares may arise from corporate actions like mergers, bonus issues, or rights issues.
Another government source said the reason for excluding fractional shares from the Bill tabled before Parliament was concern over minority shareholder powers and a weakening of the framework, since such shares would lack voting rights.
The proposal to bring fractional shares in the ambit of company law had originated for the first time in the Company Law Committee’s report in 2022. The Committee had proposed bringing three forms of equity-linked ownership or compensation that are not recognised or clearly provided for in the Companies Act, 2013.
"Issuance of fractional shares will increase market liquidity, leading to better price discovery. This would give retail investors a much wider pool of options. However, in the Indian context, we need a better system for investor protection and education if we plan to introduce fractional shares," said Ankit Singhi, partner, Corporate Professionals.
The Bill tabled in Parliament on March 23 recognised new forms of instruments linked to share capital value for executive compensation, such as Restricted Stock Units and Stock Appreciation Rights, in addition to Employee Stock Option Plans, but it did not include fractional shares.
Experts said fractional shares would increase retail investor participation in the markets, as many lack the purchasing power to buy a whole share due to the high price of a single unit.
Countries such as Canada, Japan and the United States allow the holding of fractional shares.
The Bill was referred to a joint parliamentary committee, which submitted its report on August 3, recommending various changes to the proposed legislation. The House panel made no recommendation for recognising fractional shares in the Companies Bill.
The Company Law Committee (CLC) stated in its report that the issuance, holding and transfer of fractional shares for a class or classes of companies should be enabled in the Companies Bill. “For listed companies, prescriptions may be made in consultation with Sebi… This recommendation only pertains to cases that would involve a fresh issue of fractional shares by the company and not to those cases where fractional shares get created for the time being on account of any corporate action,” the CLC said.
Experts feel that the legislation should establish a clear, technology-enabled framework defining the rights of fractional shareholders and the responsibilities of companies, depositories and intermediaries.
“Introducing fractional shares into the Companies Bill could be a meaningful step towards modernising India’s corporate and investment framework, particularly as retail participation and digital investing continue to expand. The reform is worth pursuing, but it should be targeted and accompanied by appropriate SEBI and depository-level regulations to ensure that increased accessibility does not come at the cost of investor protection or regulatory certainty,” said Surbhi Kapoor, Partner, King Stubb & Kasiva, Advocates and Attorneys.
[The Business Standard]
