debenture trustees

SEBI has vide its notification dated 8th October, 2020 amended the SEBI (Debenture Trustees) Regulations 1993 in the following manner.

Regulation 14 has been amended as follows:

“Every debenture trustee shall amongst other matters, accept the trust deeds which shall contain the matters as specified in section 71 of Companies Act, 2013 and Form No. SH.12 specified under the Companies (Share Capital and Debentures) Rules, 2014. Such trust deed shall consist of two parts:
a. Part A containing statutory/standard information pertaining to the debt issue;
b. Part B containing details specific to the particular debt issue.”

What has been highlighted has been added to the clause.

Regulation 15(1)(h) has been amended as follows:

“ensure the implementation of the conditions regarding creation of
security for the debentures, if any, debenture redemption reserve and
recovery expense fund
;”

Regulation 15 pertains to duties of debenture trustees. The highlighted portion has been added to the clause.

Regulation 15(1)(t) has been replaced as follows:

“In case where listed debt securities are secured by way of receivables/
book debts, it shall, –
(i) on a Quarterly basis-
(a) carry out the necessary due diligence and monitor the asset cover in the manner as may be specified by the Board from time to time.
(ii) on a Half-Yearly basis-
(a) 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 in the manner as may be specified by the Board from time to time.”

The earlier clause t stipulated a certificate from the director/ managing director regarding the value of the book debts/ receivables on quarterly basis and certificate from an independent CA giving the value of the book debts/ receivables on half yearly basis. Now the certification from the director/ managing director has been omitted and secondly the half yearly certificate is from the statutory auditor of the issuer and covers much larger mandates meaning compliance with the covenants of the offer document/ information memorandum.

Regulation 15(2)(b) has been amended as follows. Reg 15(2) pertains to calling of a meeting by debenture trustee whenever certain conditions exist. The amended reg 15(2)(b) reads as follows:

(b) the happening of any event, which constitutes a default 65[or breach of covenants (as specified in the Offer Document/Information Memorandum and/or debenture trust deed)] or which in the opinion of the debenture trustees affects the interest of the debenture holders:
66[Provided that a debenture trustee may seek the consent of debenture holders through e-voting, wherever applicable;
Provided further that the requirement to convene a meeting of all debenture holders in case of a default in payment obligation by the issuer, shall not be applicable in case of debentures issued by way of public issue.]

The highlighted wordings have been added to the clause.

Two new sub clauses (6) and (7) have been added to regulation 15, which pertains to duties of debenture trustees.

[(6) Before creating a charge on the security for the debentures, the debenture trustee 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, in the manner as may be specified by the Board from time to time.
(7) Subject to the approval of the debenture holders and the conditions as may be specified by the Board from time to time, the debenture trustee, on behalf of the debenture holders, may enter into inter-creditor agreements provided under the framework specified by the Reserve Bank of India.]

https://www.sebi.gov.in/legal/regulations/oct-2020/sebi-debenture-trustees-amendment-regulations-2020_47824.html#lir6

Leave a comment

Filed under securities laws

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s