India’s markets regulator has renewed calls for integrating fractional shares into company law, potentially transforming accessibility and liquidity in the stock market for retail investors, amid ongoing policy discussions.
India’s markets regulator has asked the Ministry of Corporate Affairs to bring fractional shares into company law, reviving a proposal that could make high-priced stocks more accessible to retail investors, according to official sources cited by Business Standard. Fractional shares are pieces of a share smaller than one full unit and can arise from corporate actions such as mergers, bonus issues or rights issues.
The push comes after the Companies Amendment Bill, tabled in Parliament on March 23, left out fractional shares even as it recognised new share-linked compensation tools such as restricted stock units and stock appreciation rights, alongside employee stock option plans. A government source said the omission reflected concern that such shares would not carry voting rights, which could weaken minority shareholder protections. The Bill was later sent to a joint parliamentary committee, which submitted its report on August 3 without recommending any change on fractional shares.
The idea is not new. The Company Law Committee, formed by the Ministry of Corporate Affairs, recommended in its 2022 report that issuance, holding and transfer of fractional shares should be enabled under company law, with separate rules for listed companies to be framed in consultation with Sebi. The panel argued that the reform would widen access to direct equity investing, particularly for smaller investors who cannot easily afford a full share in expensive companies.
Market participants say the change could improve liquidity and broaden participation, especially in blue-chip names with high share prices. Ankit Singhi, a partner at Corporate Professionals, told Business Standard that issuance of fractional shares could improve price discovery and expand options for retail investors, but said India would need stronger investor protection and education before such a system is introduced. Countries including Canada, Japan and the United States already allow fractional share ownership.
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