Following its decision to enhance the role of debenture trustees, SEBI has amended the Issue and Listing of Debt Securities Regulations, 2008, the Debenture Trustees Regulations, 1993 and the Listing Obligations and Disclosure Requirements Regulations, 2015 with effect from 8 October 2020.
A new regulation 21B mandates the issuer who is making a private placement of debt securities to give an undertaking in the Information Memorandum that (i) the assets on which charge is created are free from any encumbrances and (ii) where the assets are already charged to secure a debt, the permission or consent to create a second or pari-passu charge on the assets of the issuer has been obtained from the earlier creditor. Where the issuer desires to roll-over the debt securities issued by it, the notice period to be provided to holders of the debt securities has been reduced to 15 days instead of 21 days. [Regulation 18(2) amended]
A new sub-regulation 7 in Regulation 26 (Obligations of the Issuer, Lead Merchant Banker, etc.) provides that the issuer shall create a recovery expense fund in the manner specified by the Board from time to time and inform the Debenture Trustee about the same.
To refer to the SEBI (Issue and Listing of Debt Securities) (Amendment) Regulations, 2020 dated 8 October 2020, click here
DTs shall ensure the implementation of the conditions regarding creation of security for the debentures, debenture redemption reserve and recovery expense fund. Where listed debt securities are secured by way of receivables/ book debts, the DT shall carry out the necessary due diligence and monitor the asset cover, on a quarterly basis. He shall also obtain a certificate from the statutory auditor of the issuer giving the value of receivables/book debts, including compliance with the covenants of the Offer Document/Information Memorandum, on a half yearly basis, in the manner specified by the Board from time to time.
Before creating a charge on the security for the debentures, the DT shall exercise independent due diligence to ensure that such security is free from any encumbrance or that it has obtained the necessary consent from other charge-holders if the security has an existing charge. The DT may enter into inter-creditor agreements provided under the framework specified by the Reserve Bank of India, on behalf of the debenture holders, subject to the approval of the debenture holders and the conditions as may be specified by the Board from time to time.
To refer to the SEBI (Debenture Trustees) (Amendment) Regulations, 2020 dated 8 October 2020 click here.
Listed entities are mandated to disclose information related to forensic audit to the stock exchanges. Further, In respect of its listed non-convertible debt securities, the listed entity is required to maintain hundred per cent asset cover or asset cover as per the terms of offer document/ Information Memorandum and/or Debenture Trust Deed, sufficient to discharge the principal amount at all times for the non-convertible debt securities issued. The listed entity shall forward a half-yearly certificate regarding maintenance of such asset cover to the DT, including compliance with all the covenants, in respect of listed non-convertible debt securities, by the statutory auditor, along with the half-yearly financial results. This is not applicable where bonds are secured by a Government guarantee.
To refer to the SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2020 dated 8 October 2020, click here.
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