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Published by LawStreetIndia
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Apurva Kanvinde (Principal Associate, Juris Corp) Jui Masurekar (Associate)
Over the last few years, the Indian debt markets have witnessed significant defaults by debt issuers. These defaults have thrown light on the various difficulties faced by debenture trustees in expeditious enforcement of collateral. These issues have arisen due to various factors such as the absence of charge on identified assets, lack of transparency, inadequate disclosures at the time of debt issuances and procedural impediments at the time of enforcement. A need was felt to amend and tighten the regime for issue of listed debentures, specifically secured debentures.
Background
In view of the above, in the last quarter of 2020, the Securities and Exchange Board of India (“SEBI”) introduced multiple amendments and circulars in respect of listed non-convertible debentures (“NCDs”). The SEBI (Debenture Trustee) Regulations, 1993, the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 were amended by SEBI, along with several circulars which were issued by SEBI. The following is an overview of the key changes introduced.
Role of debenture trustees
“12. Before making the application for listing of debt securities, the Issuer shall create charge as specified in the OD or PPM/ IM, in favour of the debenture trustee and also execute debenture trust deed (DTD) with the debenture trustee.
13. The Stock Exchange(s) shall list the debt securities only upon receipt of a due diligence certificate as per format specified in Annexure B from debenture trustee confirming creation of charge and execution of the DTD.”
Asset cover maintenance
Modifications to NCD documentation