Sep 30, 2022

Enhanced Guidelines for Debenture Trustees and Listed Issuer Companies of Security Creation and Initial Due Diligence

SEBI, by way of its Circular dated August 4, 2022, enhanced the guidelines applicable for Debenture Trustees (‘DT’) for due diligence and the manner in which an Issuer company who has listed debt securities proposes to change the security, or create additional security, or convert unsecured debentures to secured debentures. The change was brought about to harmonize the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR Regulations’), and the SEBI Circular dated November 3, 2020 (‘2020 Circular’).

The enhanced guidelines have also created a strict timeline of 30 days within which once the charge is created in favour of the DT, the same must be registered with the relevant statutory authorities, i.e., the Registrar of Companies, CERSAI, depository etc., failing which, the same will be considered as a breach of the terms of the issue by the issuer. After the creation and registration of charge, the issuer company and DT must also enter into a supplemental/ amended debenture trust deed including all the terms and conditions arising out of the due diligence carried out by the DT as well as of the security created by issuer company.

Lastly, reporting requirements on issuer companies have been increased, in the new regime, wherein they must submit to the depositories and stock exchanges the following documents:

i.     No Objection Certificate by DT for change in security or creation of security;

ii.    Executed supplemental/amended debenture trust deed;

iii.   An undertaking from the DT that the security has been created and register; and

iv.   Other documents/consents required to be submitted under Regulation 59 of the LODR Regulations.




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