Securities or Financial Assets: One Half Defined, One Half Isn't

The Companies Act, 2013 never wrote its own definition of "securities." Section 2(81) simply borrows one: "'securities' means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956." The actual list lives entirely in that older statute. Confirmed directly against Section 2(h) of the SCRA, 1956, "securities" includes, among other items, "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," derivatives, units issued by a collective investment scheme, security receipts, mutual fund units, certain special-purpose-entity certificates, Government securities, any other instrument the Central Government declares to be a security, and rights or interests in securities. Whatever a "security" is for a Companies Act purpose, the definition was never company law's own to write.

"Financial asset" gets no equivalent treatment. Checked directly against every place it could plausibly sit:

• Section 2 of the Companies Act, 2013 does not define it.
• Rule 2(1) of the Companies (Registered Valuers and Valuation) Rules, 2017 defines "asset class" only in the abstract, "a distinct group of assets, such as land and building, machinery and equipment, displaying similar characteristics, that can be classified and requires separate set of valuers for valuation." It does not enumerate what falls inside "Securities or Financial Assets" specifically.
• Annexure IV to the same Rules, the schedule that actually names the three asset classes, does the opposite of what its name suggests: it lists who can register as a valuer for the class, not what the class covers.
• ICAI Valuation Standard 303, Financial Instruments, uses the term constantly without ever separately defining it. Paragraph 5's own definition of "financial instrument" runs through it in passing: "any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity." "Financial asset" does the defining work for a different term, and is never itself pinned down.

No document inside the framework a registered valuer actually operates under says what a "financial asset" is.

The phrase does have real statutory homes, just not inside company law.

Section 2(1)(l) of the SARFAESI Act, 2002 defines "financial asset" precisely: it "means debt or receivables and includes a claim to any debt or receivables... any debt or receivables secured by mortgage of, or charge on, immovable property... any right or interest in the security... any beneficial interest in property..." and similar. This is a real, quotable, statutory definition, built entirely around the securitisation of bank debt, the machinery for asset reconstruction companies buying distressed loans. It has nothing to do with shares, securities, or a going-concern business. Nothing in company law or the Valuation Rules cross-refers to it. Citing it as the definition behind the SFA asset class would be quoting the right two words from the wrong statute.

The closer analogue sits in accounting, not company law. Ind AS 32, Financial Instruments: Presentation, paragraph 11, defines a financial asset as "any asset that is: (a) cash; (b) an equity instrument of another entity; (c) a contractual right... to receive cash or another financial asset from another entity; or... to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable..." with a further limb covering certain contracts settled in an entity's own equity instruments. This is genuinely the concept ICAI VS 303 is drawing on when it uses the term. It is also, formally, an accounting standard, not something Section 247 or the Valuation Rules themselves import.

The General Clauses Act, 1897 supplies default definitions for terms used across central legislation when the specific Act is silent, "person," "immovable property," "financial year," and similar. Checked directly against the full list in Section 3: it does not define "securities," "financial asset," or "shares." Its closest relevant term is the residual property category in Section 3(36), "'movable property' shall mean property of every description, except immovable property." A share or a financial instrument would technically fall inside that catch-all, the way literally any non-land asset would, but it is a generic property-law fallback from an 1897 Act that predates modern securities-market vocabulary entirely, not a definition anyone in this framework actually reaches for. Neither the Companies Act nor the Valuation Rules invokes it for this purpose.

No single Ministry of Corporate Affairs explanatory document stating the exact rationale for the name turned up in this research, so this is a reading of the structure, not a quoted official explanation. "Equity Shares" was never a serious option; it would have excluded debentures, preference shares, and everything else already inside SCRA's own list. "Securities" alone runs into its own limit: SCRA's definition, built around incorporated companies and collective schemes, does not obviously reach a going-concern business valuation, an LLP or partnership interest, or other financial rights sitting outside that specific framing, exactly the kind of work an SFA-registered valuer is routinely asked to do, covered across this series in What Valuation Standard Actually Governs an SFA Registered Valuer? and Preference Shares Are an SFA Valuer's Job. Redemption Isn't..

"Financial Assets" reads as the deliberately open residual half of the name, doing for this asset class what "Land and Building" and "Plant and Machinery" do for the other two: naming a domain by what a valuer needs expertise in, not by drafting a closed legal definition and hoping nothing falls outside it.

A valuer working in this asset class operates inside a name with two very different kinds of edges. "Securities" is precisely bounded, imported whole from a 1956 statute, and a valuer can point to exact statutory text for what it covers. "Financial Assets" is not bounded at all, not by the Companies Act, not by the Valuation Rules, not by ICAI's own standards, and not by the General Clauses Act either. That is not a drafting failure to fix. It is most likely the point: the second half of the name was built to be broader than the first, precisely so the asset class would not be trapped inside SCRA's own boundaries.