Mar 11, 2019

Review of framework for Debenture Trustees by SEBI

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SEBI, at its Board meeting held on March 01, 2019 reviewed the framework of Debenture Trustees. In order to secure the interests of the debenture holders and to enable Debenture Trustees (DTs) to perform their duties effectively and promptly, the Board has approved amendments to the regulatory framework vis-à-vis SEBI Amendments to SEBI (Debenture Trustee) Regulations, 1993, SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Listing Obligations and Disclosure Requirements), 2015 for DTs. The changes proposed include the following:

  1. The minimum net worth requirement of a DT shall be increased from existing Rs. 2 crore to Rs. 10 crore.
  2. The requirement of calling for a meeting of debenture holders in the event of default in payment obligation by issuer in case of public issue of debt securities shall not be obligatory.
  3. E-Voting shall be a valid option for DTs to obtain consent of the debenture holders, wherever applicable.
  4. In case of delay in creation of charge in favour of DT within the specified period, the issuer shall pay additional interest as specified in the Trust Deed and disclosed in the Offer Document to the debenture holders for the period of delay in creation of charge.
  5. In case of issuers having both listed equity and debt securities, the certificate from the DT as per the requirement of Reg 52 (5) of LODR shall be submitted to the stock exchange(s) by the issuer within 7 working days from the date of submission of half yearly/ annual financial results to the stock exchange(s).

As per erstwhile Reg 52(5) of the Regulations, no time period was stipulated for submission of the aforementioned Certificate. 

To recapitulate, SEBI has already vide its Circular dated November 26, 2018 issued mandatory guidelines for fund raising requisite by large corporates by way of debt issuances and the same being effective from April 1 2019. Click here to read our detailed Analytical Note on the same.

CP’s Comment

As per the Debt Listing Regulations and Debenture Trustee Regulations, a whole lot of responsibilities are cast upon the DTs and these proposed amendments will assist in further strengthening their role.

Furthermore, in view of the mandatory fund raising requisite by large corporates by way of debt issuances, the same was the need of the hour, so that more and more investors are inclined to invest in the Debt securities and their interests are not jeopardized.

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