SECURITIES AND EXCHANGE BOARD OF INDIA 1.

18.1

Item No. 18

SECURITIES AND EXCHANGE BOARD OF INDIA

Memorandum No. 60/2017

Amendments to the SEBI (Debenture Trustee) Regulations, 1993

1. Objective

1.1. This memorandum seeks the approval of the Board to make amendments to the

SEBI (Debenture Trustees) Regulations, 1993 (“DT Regulations”).

2. Background

2.1. SEBI had set up a Task Force comprising of SEBI officials and representative of

Debenture Trustees (DTs) for examining the "Challenges in performing the

obligations and duties as Debenture Trustees to protect the interests of the

debenture holders". The task force discussed the amendments to be made in the

DT Regulations to harmonise the existing provisions with that of the Companies

Act 2013 and to fortify the existing provisions to enable the debenture trustees

to perform the task of securing the interest of the investors. The Task Force has

submitted its recommendations which, inter alia, include proposals regarding

amendments to DT Regulations.

2.2. Pursuant to the recommendations of the Task Force, a Board Memorandum

seeking approval for initiation of public consultation process on Consultative

Paper on proposed amendments to SEBI (Debenture Trustee) Regulations, 1993

(DT Regulations) was placed before the SEBI Board in its 170th Board meeting

held on February 11, 2017.

18.2

3. Public Consultation

3.1 The above-mentioned Board Memorandum was approved by the SEBI Board in

its meeting held on February 11, 2017 and accordingly a Consultative Paper

was placed on the SEBI website on February 16, 2017 seeking public comments

to be submitted latest by March 08, 2017. The Consultative Paper is placed at

Annexure I.

3.2 Comments (including suggestions) were received from 11 entities/ persons

which included Debenture Trustees, Debenture Issuer Companies, Investors,

and Individuals.

4. Proposed amendments to the DT Regulations:

4.1 The comments received from the entities/ persons have been analyzed. Taking

into consideration the proposals made in the Consultative Paper and Public

Comments received in this regard, amendments are proposed in the SEBI

(Debenture Trustee) Regulations, 1993. The proposed amendments in the DT

Regulations may be categorized as mentioned below:

4.2 Amendments proposed in the light of the changes in the Companies Act 2013,

Companies (Share Capital and Debentures) Rules 2014 etc.- For the purpose

of harmonization in the provisions given in DT Regulations with those given in

the Companies Act 2013 and Companies (Share Capital and Debentures) Rules

2014 etc., the amendments are proposed in the following existing provisions in

the DT Regulations:

a) Provisions relating to definition of 'associate', 'debenture' and 'principal

officer'.

b) Provisions relating to agreement between DT and the issuer.

c) Provisions relating to appointment as debenture trustee.

d) Provisions relating to the contents of the Trust Deed.

18.3

e) Provisions relating to the Board's right to inspect and initiate disciplinary

proceedings.

4.3 Amendments proposed on account amendment of the other SEBI regulations

viz. SEBI (Substantial Acquisition of Shares and Takeovers)

Regulations2011, etc. - For the purpose of harmonization in the provisions

given in DT Regulations with those given in SEBI (Substantial Acquisition of

Shares and Takeovers) Regulations 2011,etc., the amendments are proposed in

the following existing provisions in the DT Regulations :

a) Provision relating to definition of 'change in control'.

b) Provision relating to definition of 'insurance company'

4.4 Other changes for improvement - For the purpose of streamlining the provisions

regarding duties of Debenture Trustees and liability for action on default/ non-

compliance, the amendments are proposed in the following existing provisions in

the DT Regulations:

a) Provision relating to definition of 'body corporate', 'debenture trustee' and

'issue'.

b) Introducing provision relating to definition of 'Recognized Stock Exchange'

and certification requirement of the Compliance Officer.

c) Provisions relating to the duties of the debenture trustees.

d) Provisions relating to end-utilization certificate from the issuer's auditors.

e) Provisions relating to maintenance of books of account, records and

documents, by the debenture trustee.

f) Provisions relating to the liabilities for actions in case of default.

4.5 The details of proposed amendments along with the analysis of the public

comments received and the rationale for acceptance/non-acceptance of public

comments and recommendations are placed at Annexure II, III & IV.

18.4

5. Proposal

5.1 The Board is requested to consider and approve the proposed amendments in the

DT Regulations as mentioned in the paras 4.2, 4.3 and 4.4 and Annexure II, III &

IV and authorize the Chairman to make such necessary consequential or

incidental changes to the SEBI (Debenture Trustee) Regulations, 1993 and take

consequent steps, as may be deemed appropriate, to give effect to the decision.

Place: Mumbai S Ravindran

Date: April 12, 2017 (Executive Director)

Sr.No. Existing provision /

Clause in the Regulation

Proposed Amendment (after

accepting/not accepting public

comments)

Rationale for Proposed

Amendment

Public Comments Rationale for Accepting/Not

Accepting Public Comment

(i) The definition shall retain the

contents of the existing regulations

regarding control in the body

corporate (issuer company) and

debenture trustee to ensure the

principle of „arm‟s length‟ or „conflict

of interest‟ between issuer and

debenture trustee.

Public Comment not accepted As

per the Section 2(6) Companies Act,

2013, an "associate company", in

relation to another company, means

a company in which that other

company has a significant influence,

but which is not a subsidiary

company of the company having

such influence and includes a joint

venture company". Further,

"significant influence" means

control of at least twenty per cent of

total share capital, or of business

decisions under an agreement".

Therefore, it appears that the issue

regarding "control" is already

addressed in the proposed definition

of an “associate”.

2 Definition : 2(b)

2(b) “Companies Act”

means the Companies

Act, 1956 (1 of 1956);

2(b) “Companies Act” means

the Companies Act, 2013 (Act

18 of 2013);

The Companies Act, 1956 has been

replaced with the Companies Act,

2013.

Hence it is proposed that

Regulation 2(b) of the SEBI (DT)

Regulations may be replaced as

stated.

No public comment received No public comment received. The

Companies Act, 1956 has been


2013. Therefore, the proposed

amendment may be accepted.

1 Definition : 2(aa)

2(aa) “associate” in

relation to a debenture

trustee, or body corporate

shall include a person,—

(i) who, directly or

indirectly, by himself, or

in combination with

relatives, exercises

control over the debenture

trustee or the body

corporate, as the case may

be, or

(ii) in respect of whom

the debenture trustee or

the body corporate, as the

case may be, directly or

indirectly, by itself, or in

combination with other

persons, exercises

control, or

(iii) whose director, is

also a director, of the

debenture trustee or the

body corporate, as the

case may be.

Explanation: For the

purpose of this regulation,

the expression “control”

shall have the same

meaning as defined under

clause (c) of Regulation 2

of the Securities and

Exchange Board of India

(Substantial Acquisition

of Shares and Takeovers)

Regulations, 1997;

2(aa)“associate” shall mean any

entity which is an associate

under sub-section (6) of section

2 of the Companies Act, 2013

or under the applicable

accounting standards and shall

include a person whose director,

is also a director, of the

debenture trustee or the body

corporate, as the case may be.

The definition of associate given in

the SEBI (DT) Regulations is

proposed to be harmonized with

the definition as mentioned in the

Companies Act, 2013.

As per Section 2(6) of the

Companies Act, 2013:

"associate company", in relation to

another company, means a

company in which that other

company has a significant

influence, but which is not a

subsidiary company of the

company having such influence

and includes a joint venture

company.

Explanation - For the purposes of

this clause, "significant influence"

means control of at least twenty per

cent of total share capital, or of

business decisions under an

agreement;

Therefore, it is proposed that the

definition of associate as given in

Regulation 2(aa) may be replaced

with the definition given in the


In the earlier definition control was

defined as right to appoint majority

directors. However, as per new

definition „significant control‟ is

defined as „control of at least

twenty per cent of total share

capital, or of business decisions

under an agreement‟.

(ii) The definition shall retain the

contents of the existing regulations

regarding common director in the

body corporate (issuer company) and

debenture trustee to ensure the

principle of „arm‟s length‟ or „conflict

of interest‟ between issuer and

debenture trustee.

Annexure - II

Amendments required in the DT Regulations in the light of the changes in the Companies Act 2013, Companies (Share Capital and Debentures) Rules 2014, etc.

Public Comment accepted With

regard to the issue of common

director in the body corporate

(issuer company) and debenture

trustee, the public comment may be

accepted so as to maintain the arms

length relationship between the

debenture trustee and the body

corporate.

Page 1 of 6





comments)


Amendment



3 Definition : 2(ba)

2(ba) “debenture” means

a debenture within the

meaning of sub-section

(12) of section 2 of the

Companies Act, 1956 (1

of 1956)

“debenture” means a debenture

within the meaning of sub-

section (30) of section 2 of the



replaced with Companies Act,

2013. The definition of debenture

remains same.

As per Section 2(30) of the

Companies Act, 2013:

"debenture" includes debenture

stock, bonds or any other

instrument of a company

evidencing a debt, whether

constituting a charge on the assets

of the company or not.

Hence, it is proposed that

Regulation 2(ba) of SEBI (DT)


stated.

(i) As per Section 2(30) of the

Companies Act, 2013, "Debenture"

includes debenture stock, bonds or

any other instrument of a company

evidencing a debt, whether

constituting a charge on the assets of

the company or not. This would mean

that debentures issued by anybody

other than a „Company‟ (as defined in

CA, 2013) may not be included.

Further, the definition of Body

Corporate has been modified in the

consultative paper. Therefore, the

definition may be modified to include

"body corporate" in place of

"company".

Public Comment not accepted (i)



2013. The definition of debenture

remains same as mentioned in the

Companies Act, 2013. Therefore,

the public comment at (i) above may

not be accepted and the proposal as

mentioned in the Consultative Paper

may be retained.

5 Regulation : 7

Eligibility for being

debenture trustee.

7. No person shall be

entitled to act as a

debenture trustee unless

he is either—

(a) a scheduled bank

carrying on commercial

activity; or

(b) a public financial

institution within the

meaning of section 4A of

the Companies Act, 1956;

or

(c) an insurance

company; or

(d) body corporate.

Eligibility for being debenture

trustee.

7. No person shall be entitled to

act as a debenture trustee unless

it is :—

(a) a scheduled bank carrying

on commercial activity; or

(b) a public financial institution

within the meaning of section

2(72) of the Companies Act,

2013; or

(c) an insurance company; or

(d) body corporate as defined

under the Companies Act, 2013

To change the reference regarding

Companies Act to the new



Regulation 7 of the SEBI (DT)


stated.

No public comments received No public comment received. The



2013, the proposed amendment only

proposes to change the reference

regarding the Companies Act to the

new Companies Act, 2013. Thus,

the proposal as mentioned in the

Consultative Paper may be retained.

“principal officer” means,—

A KMP as defined under sub

section (51) of section 2 of the

Companies Act, 2013, and shall

include any person connected

with the management or

administration of the body

corporate upon whom the Board

has served notice of its intention

of treating him as the principal

officer thereof;

Definition : 2(f)

2(f) “principal officer”

means,—

(i) a secretary, manager or

director of the body

corporate; or

(ii) any person connected

with the management or

administration of the

body corporate upon

whom the Board has

served notice of its

intention of treating him

as the principal officer

thereof;

4 Public Comment accepted. In

order to provide flexibility to the

debenture trustees in appointment of

principal officer, public comment

may be accepted to the extent of

including the provisions as given in

clause (ii) of regulation 2(f) of

present DT regulations along with

the proposed amendment in the

regulations. The proposed

amendment as mentioned in the

consultative paper may be

accordingly modified.

(i) Compliance officer, Company

Secretary and Executive as well as

Non-Executive Directors of body

corporate may be included in

definition of KMPs to enable them to

be appointed as the principal officer.

To oversee the activities of the

DT, a senior level official shall be

entrusted with the position of the

Principal Officer. Therefore, it is

proposed to replace the definition

of a principal officer to include

KMP as defined in the Companies

Act 2013.

As per the Section 2(51) of the

Companies Act 2013:

“key managerial personnel”, in

relation to a company, means—

(i) the Chief Executive Officer or

the managing director or the

manager;

(ii) the company secretary;

(iii) the whole-time director;

(iv) the Chief Financial Officer;

and

(v) such other officer as may be

prescribed

Therefore, it is proposed that

Regulation 2(f) of SEBI (DT)

regulations may be replaced as

stated.

Page 2 of 6





comments)


Amendment



(i) Many times the issuers enter into

an agreement with the debenture

trustee for a certain amount and then

the debentures are issued through

various prospectus/Information

Memorandums. Thus, deletion of the

word "each" used in the Regulation

13 may be considered.

Public Comment not accepted (i)

With regard to public comment at

point no. (i), the deletion of the

word "each" may not have any

material impact on the requirement

of written agreement between the

debenture trustee and issuer

company. Further, inclusion of

word 'each' will give flexibility to

the issuer companies to appoint

different debenture trustees for

different issues of debenture. Thus

the public comment at point no. (i)

may not be accepted.

(ii) No separate written agreement

may be required if Debenture Trust

Deed is executed upfront as the

appointment of the trustee gets

captured in the Debenture Trust Deed

itself.

Public Comment not accepted (ii)


point no. (ii), the Clause 8 (2)(b) of

the Companies (Share Capital and

Debentures) Rules 2014, "before

the appointment of debenture

trustee or trustees, a written consent

shall be obtained from such

debenture trustee or trustees

proposed to be appointed and a

statement to that effect shall appear

in the letter of offer issued for

inviting the subscription of the

debentures". Therefore, the public

comment at point no. (ii) with

regard to exemption from entering

into written agreement if Trust Deed

is executed upfront may not be

accepted.

(iii) The regulation shall clearly

specify the time period by when the

Debenture Trustee Appointment

Agreement must stand executed.

Public Comment not accepted


point no. (iii), the Regulation 13(a)

mentions that the debenture trustee

"enters into a written agreement

with the body corporate before the

opening of the subscription list for

issue of debentures" which

addresses the public comment at

point (iii) above.

(iv) A clause regarding consent of

debenture trustee to act as trustee for

an issue for the benefit the debenture

holders as per provisions of these

regulations and other relevant

laws/regulations may be added.

Public Comment not

accepted.The requirement for

adding any seperate clause for such

consent may not be required, as the

DT is requird to disclose in the

prospectus that a written consent

has been obtained as poer the

Companies Act 2013. Thus, the

public comment at point (iv) may

not be accepted.

As per Companies Act, 2013 and

also other SEBI Regulations, issuer

company has to comply with

various provisions even before

allotment of debentures. A clause

regarding an undertaking by the

debt issuer companies to comply

with the Companies Act 2013 may

be incorporated as DTs have

expressed difficulty in impressing

upon the issuer companies

regarding various provisions

prescribed by the regulatory

authorities.

Obligation before appointment

as debenture trustees.

13. No debenture trustee who

has been granted a certificate

under regulation 8 shall act as

such in respect of each issue of

debenture unless—

(a) ....

(b) the agreement under clause

(a) shall inter alia contain:

(i) an undertaking by the body

corporate to comply with all

regulations / provisions of

Companies Act, 2013,

guidelines of other regulatory

authorities in respect of

allotment of debentures till

redemption;

(ii) the time limit within which

the security for the debentures

shall be created or the

agreement shall be executed in

accordance with the Companies

Act, 2013 or provisions as

prescribed by any regulatory

authority as applicable.

Regulation : 13(b)

Obligation before

appointment as debenture

trustees.

13. No debenture trustee

who has been granted a

certificate under

regulation 8 shall act as

such in respect of each

issue of debenture

unless—

(a) ....

(b) the agreement under

clause (a) shall inter alia

contain:

(i) that the debenture

trustee has agreed to act

as such under the trust

deed for securing an issue

of debentures for the

body corporate;

(ii) the time limit within

which the security for the

debentures shall be

created.

6

Page 3 of 6





comments)


Amendment



(v) A clause regarding undertaking by

the body corporate to comply with the

time limit within which the security

for the debentures shall be created or

the agreement shall be executed in

accordance with the Companies Act,

2013 or provisions as prescribed by

any regulatory authority as applicable

may be included in the written

agreement.

Public Comment not accepted (v)


point no. (v), the time limit for

creation of security has to be

mentioned in the written agreement.

Further, Regulation 15(1) of the

SEBI (ILDS) Regulations mention

that the "trust deed for securing the

issue of debt securities shall be

executed by the issuer in favour of

the debenture trustee within three

months of the closure of the issue".

As the issuer is already obligated

under ILDS Regulations to adhere

to the time limit for creation of

security, mention of any

undertaking to this effect in the DT

Regulations may not be accepted.

(i) The word “he” in Regulation 13A

may be substituted with the word “it”

as “Individual Person” cannot act as a

Trustee.

Public Comment accepted In

order to bring more clarity in the

provisions, the public comments at

point no. (i) may be accepted to the

extent of replacing the word "he"

with "debenture trustee". The

proposed amendment as mentioned

in the consultative paper may be


(ii) From Regulation 13A (a) (ii) the

words “director or KMP or any other

employee of the Company or its

holding, subsidiary or associate

company” and entire Regulation 13A

(a) (ii) may be deleted as “Individual

Person” cannot act as a Trustee.

Public Comment not accepted.

The public comment at point (ii)

would not make any material

improvement in the proposed

amendments to the DT Regulations.

Further, the same provisions are

mentioned in the Companies Act,

2013. Therefore, the public

comment at (ii) above may not be

accepted.

As per clause 18(2)(c) Companies

(Share Capital and Debentures)

Rules, 2014 various prohibitions

are mentioned from acting as a

debenture trustee. The same may

be incorporated in the DT

Regulations too.

Therefore, it is proposed to modify

the Regulation 13A(a) of the SEBI

(DT) Regulations to incorporate

the requirements of the clause

18(2) (c) of Companies (Share

Capital and Debentures) Rules,

2014 various as stated.

Further, it is also proposed that

wherever, government provides

guarantees for the debentures

issued, the proposed prohibition to

act as DT may not be applicable.

Further, as per the public

comments received on the issue, a

specific provision regarding

prohibition of debenture trustee to

act as debenture trustee for its

associate has been included in

addition to the existing prohibitions

mentioned in the clause 18(2)(c)

Companies (Share Capital and

Debentures) Rules, 2014. The said

provision would bring more clarity

with regard to restrictions on

appointment of debenture trustee

by issuer companies.

As per the Section 18(2)(c) of the

Companies Act 2013:

A person shall not be appointed as

a debenture trustee, if he-

(i) beneficially holds shares in the

company;

(ii) is a promoter, director or key

managerial personnel or any other

officer or an employee of the

company or its holding, subsidiary

or associate company;

(iii) is beneficially entitled to

moneys which are to be paid by the

company otherwise than as

remuneration payable to the

debenture trustee;

(iv) is indebted to the company, or

its subsidiary or its holding or

associate company or a subsidiary

of such holding company;

(v) has furnished any guarantee in

respect of the principal debts

secured by the debentures or

interest thereon;

(vi) has any pecuniary relationship

with the company amounting to

two per cent. or more of its gross

turnover or total income or fifty

lakh rupees or such higher amount

as may be prescribed, whichever is

lower, during the two immediately

preceding financial years or during

the current financial year;

(vii) is relative of any promoter or

any person who is in the

employment of the company as a

director or key managerial

personnel


sub-clause (a) to Regulation 13A

may be replaced as stated.

13A A person shall not be

appointed as a debenture

trustee, if the debenture trustee

(a) (i) is an associate of the

body corporate,

(ii) beneficially holds shares

in the company;

(iii) is a promoter, director or

KMP or any other officer or an

employee of the company or its


company;

(iv) is beneficially entitled to

moneys which are to be paid by

the company otherwise than as


debenture trustee;

(v) is indebted to the company,

or its subsidiary or its holding or

associate company or a

subsidiary of such holding

company;

(vi) has furnished any guarantee

in respect of the principal debts


interest thereon;

(vii) has any pecuniary

relationship with the company

amounting to 2% or more of its

gross turnover or total income

or Rs.50 Lakh or such higher

amount as may be prescribed,

whichever is lower, during the

two immediately preceding

financial years or during the

current financial year;

(viii) is relative of any promoter

or any person who is in the

employment of the company as

a director or KMP;

(ix) is likely to have conflict of

interest in any other manner.

Provided that this requirement

shall not be applicable in respect

of debentures issued:

(i) wherever there is guarantee

by the state / central government

for the debentures issued

Regulation : 13A(a)

13A Debenture Trustee

not to act for an associate.

No debenture trustee shall

act as such for any issue

of debentures in case—

(a) it is an associate of the

body corporate, or

7

As per Companies Act, 2013 and

also other SEBI Regulations, issuer

company has to comply with

various provisions even before

allotment of debentures. A clause

regarding an undertaking by the

debt issuer companies to comply

with the Companies Act 2013 may

be incorporated as DTs have

expressed difficulty in impressing

upon the issuer companies

regarding various provisions

prescribed by the regulatory

authorities.

Obligation before appointment

as debenture trustees.

13. No debenture trustee who

has been granted a certificate

under regulation 8 shall act as

such in respect of each issue of

debenture unless—

(a) ....

(b) the agreement under clause

(a) shall inter alia contain:

(i) an undertaking by the body

corporate to comply with all

regulations / provisions of


guidelines of other regulatory

authorities in respect of

allotment of debentures till

redemption;

(ii) the time limit within which

the security for the debentures

shall be created or the

agreement shall be executed in

accordance with the Companies

Act, 2013 or provisions as

prescribed by any regulatory

authority as applicable.

Regulation : 13(b)

Obligation before

appointment as debenture

trustees.

13. No debenture trustee

who has been granted a

certificate under

regulation 8 shall act as

such in respect of each

issue of debenture

unless—

(a) ....

(b) the agreement under

clause (a) shall inter alia

contain:

(i) that the debenture

trustee has agreed to act

as such under the trust

deed for securing an issue

of debentures for the

body corporate;

(ii) the time limit within

which the security for the

debentures shall be

created.

6

Page 4 of 6





comments)


Amendment



(iii) Regulation may not be applicable

where nominee director appointed as

per Regulation 15 (1) (e) as the Issuer

company would become the

"associate" of the debenture trustee if

there is common director between the

debenture trustee and the issuer

company.

Public Comment not accepted (ii)

With regard to the public comments

at point no. (iii), it is the duty of the

debenture trustee to appoint

nominee director in the event of

default. Further, it is not necessary

the debenture trustee appoints its

own Director and nominee director

on the board of the issuer company.

Thus, the comment may not be

accepted.

(iv) Regulation may be modified to

address the issue of possibility of

having conflict of interest in advance

before appointing a person as

debenture trustee.

Public Comment accepted (iii)

The piblic comment at point (iv)

may be accepted to include any

likely conflict of interest in any

manner other than those mentioned

in point (i) to (viii) of the proposed

amendment. The proposed

amendment as mentioned in the



(v) Associate shall include a person

whose director, is also a director, of

the debenture trustee or the body

corporate, as the case may be so that

arms length relationship between

issuer company and the debenture

trustee may be maintained.

Public Comment accepted (iv)

The public comment at point no. (v)

pertains to the definition of

"associate company" mentioned at

proposed regulation 2(aa) of DT

Regulations.







Regulations too.




























Companies Act 2013:




company;










debenture trustee;








interest thereon;














personnel








body corporate,


in the company;





company;





debenture trustee;





company;




interest thereon;














a director or KMP;









Regulation : 13A(a)







body corporate, or

7

Page 5 of 6





comments)


Amendment



(vi) The debenture trustee shall not


associate to avoid conflict of interest

or considering „arm‟s length

principle‟.

Public Comment accepted (v)

The public comment at point no.

(vi), may be accepted as it may

bring more clarity with regard to

restrictions on appointment of

debenture trustee by issuer

companies.

8 Regulation : 14

Obligation of the

debenture trustees.

14. Every debenture

trustee shall amongst

other matters accept the

trust deeds which contain

the matters specified in

Schedule IV to the

regulations

Obligation of the debenture

trustees.

14. 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 and

Debentures) Rules, 2014 .

The Companies Act 2013 prescribe

the contents of Trust Deed. Hence,

to align with Companies Act, 2013

it is proposed that the contents of

the trust deed to be maintained by

debenture trustee may be in terms

of the Companies Act, 2013 as it is

more exhaustive.


Regulation 14 of the SEBI (DT)

Regulations may be harmonized in

terms of the Companies Act 2013.

Further in view of the above

modification the Schedule IV

(which specifies the contents of

trust deed ) to DT Regulations shall

be deleted.

(i) It may be specifically mentioned

that with substitution of Regulation

14 the Schedule-IV stand deleted /

omitted.

Public Comment accepted (i) It

is already mentioned in the

consultative paper that the Schedule

IV (which specifies the contents of

trust deed ) to DT Regulations shall

be deleted. Therefore, the public

comment at (i) is already

incorporated. Thus, the proposal as

regards deletion of Schedule IV

shall be incorporated as a footnote

to the amended DT regulations.

9 Regulation : 19(2)(b)

Board‟s right to inspect.

19. (1) ....

(2) The purposes

referred to in sub-

regulation (1) shall be as

follows, namely:—

(a) ....

(b) that the

provisions of the


Circulars, rules and

regulations are being

complied with;

(c) ....

Board‟s right to inspect.

19. (1) ....

(2) The purposes referred to

in sub-regulation (1) shall be as

follows, namely:—

(a) ....

(b) that the provisions of

the Companies Act, 2013,

Circulars, rules and regulations

are being complied with;

(c) ....

To change the reference regarding

Companies Act to the new


Therefore, Regulation 19(2)(b)


No public comments received. No public comments received. The



2013, the proposed amendment

proposes to change the reference

regarding the Companies Act to the

new Companies Act, 2013. Thus,

the proposal as mentioned in the

Consultative Paper may be retained.







Regulations too.




























Companies Act 2013:




company;










debenture trustee;








interest thereon;














personnel








body corporate,


in the company;





company;





debenture trustee;





company;




interest thereon;














a director or KMP;









Regulation : 13A(a)







body corporate, or

7

Page 6 of 6





comments)


Amendment



1 Definition : 2(ae) (i)

2(ae) “change in control”, in

relation to a debenture

trustee, means :—

(i) if its shares are listed on

any recognised stock

exchange, change in control

within the meaning of

Regulation 12 of the

Securities and Exchange

Board of India (Substantial

Acquisition of Shares and

Takeovers) Regulations,

1997;

(ii) ....

2(ae) “change in control”, in

relation to a debenture trustee,

means :—

(i) if its shares are listed on any

recognised stock exchange, change

in control as per the provisions of

Regulation 4 of the Securities and


(Substantial Acquisition of Shares

and Takeovers) Regulations, 2011;

(ii) ....

The SEBI ((Substantial

Acquisition of Shares &

Takeovers) Regulations, 1997

has been repealed and

substituted with SEBI

(Substantial Acquisition of

Shares & Takeovers)

Regulations, 2011. Hence, for

harmonization, it is proposed

to replace the definition of

"change in control" in terms

of the SEBI (SAST)

Regulations, 2011.


Regulation 2(ae) (i) of the

SEBI (DT) Regulations may be

replaced as stated.

No public comments received. No public comments received.

The SEBI (Substantial Acquisition

of Shares & Takeovers)

Regulations, 1997 has been

repealed and substituted with

SEBI (Substantial Acquisition of

Shares & Takeovers)

Regulations, 2011. Hence, for

harmonization, it is proposed to

replace the definition of

"change in control" in terms of

the SEBI (Substantial Acquisition

of Shares and Takeover)

Regulations, 2011. Thus, the

proposal as mentioned in the

Consultative Paper may be

retained.

2 Definition : 2(e)

2(e) “insurance company”

means a company as

defined in clause (21) of

section 2 of

the Companies Act;

2(e) “insurance company” has the

same meaning assigned to it under

section 2(7A) of the Insurance Act,

1938

It is proposed to replace the

definition of insurance

company as mentioned in the

Insurance Act, 1938 as no

corresponding definition is

present in the Companies

Act, 2013


It is proposed to replace the

definition of the "insurance

company" as mentioned in the

Insurance Act, 1938 as no

corresponding definition is

present in the Companies Act,

2013. Thus, the proposal as

mentioned in the Consultative

Paper may be retained.

Annexure - III

Changes on account of amendment in other regulations i.e SEBI (Substantial Acquisition of Shares and Takeovers) Regulations) 2011, etc.

Page 1 of 1





comments)


Amendment



The term ‘body corporate’ as

provided in the SEBI (DT)

Regulations is being

harmonized with the

definition in Companies Act,

2013.

Further, it is also proposed to

include government bodies,

Public Financial Institutions as

defined under Section 2(72)

of the Companies Act, 2013,

NBFCs, Public Sector

Undertakings established

under any Central or State

enactment which has its debt

securities listed or which seek

to list its debt securities on a

recognized stock exchanges.

As per Clause 11 of Section 2

of the Companies Act, 2013:

“body corporate” or

"corporation” includes a

company incorporated

outside India, but does not

include-

(i) a co-operative society

registered under any law

relating to co-operative

societies; and

(ii) any other body corporate

(not being a company as

defined in this Act), which the

Central Government may, by

notification, specify in this

behalf;

Further, in order to take care

of any class of debt issuers

which may evolve in future,

"body corporate" may also

include any other issuer of

debt securities in accordance

with any Regulations issued

by SEBI. Therefore, it is

proposed to modify the

definition of body corporate

as stated.

2(ab) ‘body Corporate’ shall have

the meaning assigned to it in or

under Clause (11) of Section 2 of

the Companies Act, 2013 (18 0f

2013) and for the purpose of these

Regulations, includes a Public

Financial Institution as defined

under Section 2(72) of Companies

Act, 2013, a Non Banking Financial

Company, Public Sector

Undertaking established under any

Central or State enactment which

has its debt securities listed or

which seeks to list its debt

securities on a recognized stock

exchange in accordance with

Securities and Exchange Board of

India (Issue and Listing of Debt

Securities) Regulations, 2008, or

any other issuer of debt securities

in accordance with any

Regulations issued by SEBI.

Definition : 2(ab)

2(ab) “body corporate”

shall have the meaning

assigned to it in or under

clause (7) of section 2 of the

Companies Act, 1956 (1 of

1956);

1 No public comments received.

The Companies Act, 1956 has

been replaced with the

Companies Act, 2013. The term

‘body corporate’ as provided in

the DT Regulations is being

harmonized with the definition

in Companies Act, 2013.

Further, the proposed

amendment also proposes to

include "Government Bodies,

Public Financial Institutions as

defined under Section 2(72) of

the Companies Act, 2013,

NBFCs, Public Sector

Undertakings established under

any Central or State enactment

which has its debt securities

listed or which seek to list its

debt securities on a recognized

stock exchanges" in the

definition of the "body

corporate". Further, in order to

take care of any class of debt

issuers which may evolve in

future, "body corporate" may

also include any other issuer of

debt securities in accordance

with any Regulations issued by

SEBI. Therefore, the proposed

amendment in the consultative

paper may be accordingly

modified.

No public comments received.

Annexure - IV

Changes for improvement

Page 1 of 9





comments)


Amendment



(i) Definition may specifically

cover Security Trustees and

Trustees issuing Pass Through

Certificates (PTCs) to

protect/safeguard the interests

of the investors as huge public

money is involved in such cases.


(i) A "Security Trusteeship" is a

contractual arrangement

amongst Borrower, Lenders

(NBFCs, Banks & Financial

Institutions etc.), and the

Security Trustee. Security

Trustee is appointed, whose

role is to create and hold the

security on behalf of all the

Lenders till the time, the loan is

settled. Therefore, Security

Trusteeship is private

agreement between three

parties(i.e. borrower, lender

and Trustee). Further, Pass

Through Certificates (PTCs) are

debt instruments that represent

ownership in a pool of assets.


(i) may not be accepted as such

activities may not fall under the

scope of DT Regulations.

Definition : 2(bb)

2(bb) “debenture trustee”

means a trustee of a trust

deed for securing any issue

of debentures of a body

corporate;


(ii) Further, the issue mentioned

in public comment at point no.

(ii) has been clarified in the

Regulation 14 of the DT

Regulations which states that

"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 and Debentures) Rules,

2014". Further, as per Clause

18(1)(c) of the Companies

(Share Capital and Debenture)

Rules, 2014, "the company shall

appoint a debenture trustee

before the issue of prospectus

or letter of offer for subscription

of its debentures and not later

than sixty days after the

allotment of the debentures,

execute a debenture trust deed

to protect the interest of the

debenture holders." Thus, it is

clear from the Regulation 14 of

the DT Regulations and the

Companies (Share and

Debentures) Rules, 2014 that

Trust Deed is to be mandatorily

executed by the debenture

trustee of the "issue" for which

it is acting as trustee. Therefore,

the public comment at point no.

(ii) may not be relevant.

Therefore, the proposal as



(ii) After the words body

corporate, the words “by

entering into an agreement

under Regulation 13b” may be

inserted as it appears from the

definition that no trust deed is

required to be executed in the

case of unsecured issue.

The existing definition of

'debenture trustee' defines it

as 'a trustee of trust deed for

securing any issue of

debentures'.

However, in case of

unsecured debentures, no

security is offered by issuer

company. Thus, in the trust

deed executed by appointing

the trustee, no security is

created.

Therefore, as no security is

created in case of unsecured

issues, the reference

regarding "trust deed for

securing any issue" in the

definition of debenture

trustee may not be

appropriate.

Therefore, it is proposed

Regulation 2(bb) may be

replaced as stated.

2(bb)“debenture trustee” means a

trustee appointed in respect of

any issue of debentures of a body

corporate.

2

Page 2 of 9





comments)


Amendment



3 Definition : 2(ea)

2(ea) “issue” means an

offer of sale of securities by

anybody corporate or by

any other person or group

of persons on its or their

behalf, as the case may be,

to the public, or the holders

of securities of such body

corporate or person or

group of persons and

includes a private

placement of debentures

made by a listed company,

which are proposed to be

listed;

2(ea) “issue” means an offer of

debentures by a body corporate,

to the public, or the holders of

securities of such body corporate

and includes a private placement

of debentures made by a body

corporate, which seeks to list its

debt securities on a recognized

stock exchange.

The proposed amendment

seeks to clarify that

debenture trustees shall be

appointed by all body

corporates which seek to list

their debt securities on a

recognized stock exchange.

As per the public comments

received on the issue,

"private placement" has been

specifically mentioned in the

definition of the "issue"

Therefore, it is proposed to

replace the Regulation 2(ea)

of the SEBI (DT) Regulations

as stated.

(i) Include private placement &

unlisted issue in the definition as

it appears form the definition of

the "issue" that such issues are

not included.

Public Comment accepted. (i)

The unlisted issues may not fall

under the purview of the SEBI,

therefore, the public comment

regarding inclusion of "unlisted

issue" in the definition of issue

may not be accepted. Further,

the proposed definition of

"issue" does not specifically

mention private placement.

Therefore, the public comment

regarding inclusion of private

placement of debentures issue

proposed to be listed on a

recognised stock exchange in

the proposed definition of

"issue" in the DT Regulations

may be accepted. Therefore,

the proposed amendment in the

Consultative Paper may be


4 No existing provision 2(k) “Recognised Stock Exchange”

shall have the same meaning

assigned to it under sub-section (f)

of section 2 of the Securities

Contracts (Regulation) Act, 1956;

Recognised stock exchange is

currently not defined in the

DT Regulations.

Therefore, it is proposed to

incorporate the definition of

a Recognised Stock Exchange

in the SEBI (DT) Regulations

by adding a new clause as

"2(k)"


The definition of “Recognised

Stock Exchange” is not present

in the current DT Regulations,

however, the reference

regarding “Recognised Stock

Exchange” has been made at

some places in the DT

Regulations. The proposed

amendment seeks to

incorporate the definition of

“Recognised Stock Exchange” as

defined under sub-section (f) of

section 2 of the Securities

Contracts (Regulation) Act, 1956

in the DT Regulations.




5 No existing provision 17A (4) The Compliance Officer so

appointed shall obtain certification

in terms of SEBI (Certification of

Associated Persons in the

Securities Markets) Regulations,

2007 or as may be specified by the

Board.

As per SEBI notification dated

March 11, 2013 issued under

Regulation 3 of the SEBI

(Certification of Associated

Persons in the Securities

Markets) Regulations, 2007,

certification requirement has

been mandated for the

associated persons

functioning as compliance

officers of debenture

trustees.

Therefore, the same may be

incorporated in the

Regulations as stated by

adding new sub-clause 4 to

Regulation 17A .

(i) The certification requirements

of the compliance officer may be

made voluntary.


The requirement of"NISM-

Series-III A : Securities

Intermediaries Compliance (Non-

Fund) Certification

Examination"certification to be

obtained by associated persons

functioning as compliance

officers of registered

intermediaries has been made

mandatory vide SEBI

notification dated March 11,

2013 issued under SEBI

(Certification of Associated

Persons in the Securities

Markets) Regulations, 2007. The

proposed amendment seeks to

incorporate the same

requirement in the DT

regulations. Therefore, the

public comment may not be

accepted and the proposal as



Page 3 of 9





comments)


Amendment



(i) With regard to point no. "c",

periodical status/ performance

report may be changed to

quarterly compliance report as

the issuer company furnishes

only the compliance report

restricted to the matters

pertaining to debenture trustee.

Further, the time limit of 7 days

from the board meeting may be

removed as it would be

impractical for the debenture

trustee to call for and track the

submission of the reports as the

dates of board meeting of each

issuer would vary.


(i) With regard to public

comment at point no. (i), the

debenture trustees are

expected to keep track of the

board meetings of issuer

companies for the purpose of

ascertaining periodical status/

performance reports from the

issuer companies. This is

required in the best interests of

the debenture holders.


may not be accepted and the

proposal as mentioned in the


retained.

(ii) With regard to point no. "d",

disclosures of such information

on the website of the debenture

trustee should suffice the

purpose of this clause and the

press release may be made non-

mandatory.

Public Comment not

accepted. (i) With regard

to the public comment at

point no. (ii), it is observed

that wide publicity of the

information regarding default

in payment of interest would

be necessary to protect the

interest of the debenture

holders. Thus the public

comment may not be

accepted.

(iii) With regard to "e", appoint

nominee director when the

issuer company shows signs of

possible default. The provision

may be revised to allow

debenture trustees to appoint a

Nominee Director on the Board

of the company if the company

delays in payment of debenture

holders’ dues by more than 30

days or fails to comply with other

provisions of the Trust Deed

adversely impacting the interest

of debenture holders and such

default is not remedied within 30

days from the date of intimation

from the debenture trustee.

Duties of the debenture trustees

15. (1) It shall be the duty of every

debenture trustee to-

a. satisfy itself that the prospectus

or letter of offer does not contain

any matter which is inconsistent

with the terms of the issue of

debentures or with the trust deed;

b. satisfy itself that the covenants

in the trust deed are not

prejudicial to the interest of the

debenture holders;

c. call for periodical status/


issuer company within 7 days of

the relevant board meeting or

within 45 days of the respective

quarter whichever is earlier;

d. communicate promptly to the

debenture holders defaults, if any,

with regard to payment of interest

or redemption of debentures and

action taken by the trustee

therefor;

e. appoint a nominee director on

the Board of the company in the

event of:

(i) two consecutive defaults in

payment of interest to the

debenture holders; or

(ii) default in creation of security

for debentures; or

(iii) default in redemption of

debentures.

f. ensure that the company does

not commit any breach of the

terms of issue of debentures or

covenants of the trust deed and

take such reasonable steps as may

be necessary to remedy any such

breach;

g. inform the debenture holders

immediately of any breach of the


covenants of the trust deed;

h. ensure the implementation of

the conditions regarding creation

of security for the debentures, if

any, and debenture redemption

reserve.

i. ensure that the assets of the

company issuing debentures and

of the guarantors, if any, are

sufficient to discharge the interest

and principal amount at all times

and that such assets are free from

any other encumbrances except

those

which are specifically agreed to by


j. do such acts as are necessary in

the event the security becomes

enforceable;

k. call for reports on the utilization

of funds raised by the issue of

debentures.

l. take steps to convene a meeting

of the holders of debentures as

and when such meeting is required

to be held;

m. ensure that the debentures

have been converted or redeemed

in accordance with the terms of

the issue of debentures;

n. perform such acts as are

necessary for the protection of the

interest of the debenture holders

and do all other acts as are

necessary in order to resolve the

grievances of the debenture

holders.

o. take possession of trust

property in accordance with the

provisions of the trust deed;

p. to take appropriate measures

for protecting the interest of the

debenture holders as soon as any

breach of the trust deed or law

comes to his notice;

q. ascertain and satisfy itself that :

(i) in case where the allotment

letter has been issued and

debenture certificate is to be

issued after registration of charge,

the debenture certificates have

been despatched by the body

corporate to the debenture

holders within 30 days of the

registration of the charge with the

Registrar of Companies;

(ii) debenture certificates have

been despatched to the debenture

holders or debentures have been

credited in the demat accounts of

the deenture holders in

accordance with the provisions of

SEBI (Debenture Trustee)

Regulations 1993, SEBI (Issue and

Listing of Debt

Securities) Regulations 2008, SEBI

(Listing

Obligations and Disclosure

Requirements) Regulations 2015

and any other SEBI regulations;

(iii) interest warrants for interest

due on the debentures have been

despatched to the debenture

holders on or before the due

dates;

(iv) debenture holders have been

paid the monies due to them on

the date of redemption of the

debentures;

r. inform the Board immediately of

any breach of trust deed or

provision of any law, which comes

to the knowledge of the trustee

Explanation: The communication

to the debenture holders by the

debenture trustee as mentioned in

these regulations may be made by

electronic media, press-release

and placing notice on its website.

s. exercise due diligence to ensure

compliance by the body corporate,

with the provisions of the

Companies Act, SEBI (Listing


Requirement), Regulations, 2015,

the listing agreement of the stock

exchange or the trust deed or any

other SEBI regulations pertaining

to debt issue.

t. In case where listed debt

securities are secured by way of

receivables/ book debts it shall

obtain the following.

i. On Quarterly basis.

a) Certificate from the Director /

Managing Director of the issuer

company certifying the value of

the book debts / receivables.

b) Certificate from an independent

chartered accountant giving the

value of book debts / receivables

ii. On Yearly basis.

a) Certificate from the statutory

auditor giving the value of book

debts / receivables.

The provisions of Reg. 15(1)


are almost similar to the

provisions of Section 71 of

Companies Act, 2013 and

Rule 18(3) of The Companies

(Share Capital and

Debentures) Rules, 2014.

Hence, sub-regulation 15(1)

(a) to (n) are similar to


However, (o) (p) (q), (r)& (s)

are added to the proposed

regulations considering

existing regulations i.e. 15(1)

(c), (j), (g), (l)and (i),

respectively, which are not

included in the Companies

Act, 2013.

The issuer companies

sometimes take the plea that

certain data is required to be

approved by the Board in

their Board Meeting and they

can submit the reports only

after the Board Meeting. To

ensure timely submission of

data, definite time frame is

needed to be mandated so

that the point of time is

crystallised for getting

reports from the issuer

companies.

Further, new provision at

point no. 't', is proposed to

be incorporated, mandating

the DT to obtain certain

certificates on quarterly and

annual basis, in case where

listed debt securities are

secured by way of

receivables/ book debts.

These Certificates shall

ensure the adequacy of the

Receivables which are the

substantial security given by

NBFCs/ HFCs etc.

Therefore, for the purpose of

harmonization with

Companies Act, 2013, it is

proposed to amend

Regulation 15 (1) of SEBI (DT)

Regulations as stated.


(iii) With regard to the public

comment at point no. (iii), (iv)

and (v), the provisions regarding

appointment of nominee

director by the debenture

trustee mentioned in the DT

Regulations are same as

mentioned in the Companies

Act, 2013. Also, it would be very

subjective to pre-empt the signs

of possible default in advance.

Further, government companies

may not be provided exemption

from the clause merely due to

difficulty in the procedure for

appointment of director.

Therefore, the public comments


6 Regulation : 15 (1)

Duties of the debenture

trustees.

15. (1) It shall be the duty of

every debenture trustee to-

(a) call for periodical

reports from the body

corporate;

(b) [deleted]

(c) take possession of trust

property in accordance with

the provisions of the trust

deed;

(ca) supervise the

implementation of the

conditions regarding

creation of security for

the debentures and

debenture redemption

reserve, wherever

applicable;

(d) enforce security in the


holders;

(e) do such acts as are

necessary in the event the

security becomes

enforceable;

(f) carry out such acts as

are necessary for the

protection of the debenture

holders and to do all things

necessary in order to

resolve the grievances of

the debenture holders;

(g) ascertain and satisfy

itself that the—

(i) in case where the

allotment letter has been

issued and debenture

certificate is to be issued

after registration of charge,

the debenture certificates

have been despatched by

the body corporate to the

debenture holders within

30 days of the registration

of the charge with the


(ii) debenture certificates

have been despatched to

the debenture holders in

accordance with the

provisions of the

Companies Act;

(iii) interest warrants for

interest due on the

debentures have been

despatched to the

debenture holders on or

before the due dates;

(iv) debenture holders have

been paid the monies due

to them on the date of

redemption of the

debentures;

(h) ensure on a continuous

basis that the property

charged to the debentures

is available and adequate at

all times to discharge the

interest and principal

amount payable in respect

of the debentures and that

such property is free from

any other encumbrances

save and except those

which are specifically

agreed to by the debenture

trustee;]

(i) exercise due diligence to

ensure compliance by the

body corporate, with the

provisions of the

Companies Act, the listing

agreement of the stock

exchange or the trust deed;

(j) to take appropriate

measures for protecting the


holders as soon as any

breach of the trust deed or

law comes to his notice;

(k) to ascertain that the


converted or redeemed in

accordance with the

provisions and conditions

under which they are

offered to the debenture

holders;

(l) inform the Board

immediately of any breach

of trust deed or provision of

any law;

(m) appoint a nominee

director on the Board of the

body corporate in the event

of:

(i) two consecutive defaults

in payment of interest to

the debenture holders; or

(ii) default in creation of

security for debentures; or

(iii) default in redemption

of debentures;

(n) communicate to the

debenture holders on half

yearly basis the compliance

of the terms of the issue by

the body corporate,

defaults, if any, in payment

of interest or redemption of

debentures and action

taken therefor.

Page 4 of 9





comments)


Amendment



(iv) With regard to point no. "e",

the condition regarding

appointment of nominee director

may be changed to "nominate as

nominee director" as a

debenture trustee only has the

power to nominate a director

whereas, the company has no

corresponding mandate to

appoint a nominee director so

nominated by the debenture

trustee. Further, an additional

provision may be added that if

the size of issue is above a

certain limit, credit rating is

below investment grade in Public

Issues, credit rating downgraded

etc. then a nominee director shall

be compulsorily nominated.

(v) With regard to point no. "e",

Government Companies may be

exempted from applicability of

this clause as directors are

appointed by President of India.

(vi) With regard to point no. "h",

time-limit for creation of security

maybe mentioned in the DT

Regulations as Rule 18(1)(c) of

the Companies (Share Capital

and debenture) Rules 2014 states

that a DTD shall be executed

within 60 days of allotment of

debentures whereas Rule 18(5)

states that a DTD shall be

executed within 3 months of

closure of the issue or offer.

Further, quantum of Debenture

Redemption Reserve to be

maintained may be specified.


(iv) With regard to the public

comment at point no. (vi), the

public comment highlights the

different time limit mentioned

in the Rule 18(1)(c ) and Rule

15(5) of the Companies (Share

Capital and debenture) Rules

2014. Moreover, the time limit

for creation of security

(execution of trust deed) is

already mentioned in the

Regulation 15(1) of the ILDS

Regulations which is “within

three months of the closure of

the issue”. Further, the

provisions regarding creation

and maintenance of DRR is are

also prescribed by the Ministry

of Corporate Affairs (MCA).

Therefore, the comments may

not be accepted.












debenture holders;












therefor;



event of:





for debentures; or


debentures.







breach;









reserve.








those





enforceable;



debentures.




to be held;











holders.




























Listing of Debt


(Listing








dates;




debentures;




















to debt issue.























(Share Capital and









(c), (j), (g), (l)and (i),



Act, 2013.














companies.








secured by way of






NBFCs/ HFCs etc.


harmonization with


proposed to amend




(iii) With regard to the public

comment at point no. (iii), (iv)

and (v), the provisions regarding

appointment of nominee

director by the debenture

trustee mentioned in the DT

Regulations are same as


Act, 2013. Also, it would be very

subjective to pre-empt the signs

of possible default in advance.

Further, government companies

may not be provided exemption

from the clause merely due to

difficulty in the procedure for

appointment of director.

Therefore, the public comments




trustees.





corporate;

(b) [deleted]




deed;

(ca) supervise the




the debentures and


reserve, wherever

applicable;



holders;



security becomes

enforceable;









itself that the—
















accordance with the

provisions of the

Companies Act;


interest due on the


despatched to the






redemption of the

debentures;














trustee;]




provisions of the













accordance with the




holders;




any law;




of:







of debentures;





the body corporate,




taken therefor.

Page 5 of 9





comments)


Amendment



(vii) Replace the word “ensure”

with “Take steps to satisfy itself”

in with regard to point no. (f), (h),

(i) and (m) as the word “ensure”

places an overarching duty on

the debenture trustee to comply

with the respective provisions

whereas the corresponding

action to comply with the same

lies at the issuers’ ends.


(v) With regard to the public

comment at point no. (vii), the

provision mentioned is same as


Act, 2013 and shall not be

modified to maintain

consistency and ensure the

interests of the debenture

holders are protected

adequately. Therefore, the

comments may not be

accepted.

(viii) With regard to point no. "q",

the timelines as per extant

regulations pertaining to

issuance of debenture

certificates may be specified as a

debenture trustee only deals

with listed securities which are

compulsorily required to be in

Demat form.

Public Comment accepted. (vii)

With regard to the public

comment at point no. (viii), it is

observed that the timeline

regarding issue of debenture

certificate and timeline

regarding credit of demat

accounts of the debenture

allottees is mentioned in SEBI

(DT) Regulations 1993, SEBI

(ILDS) Regulations, 2008 and

SEBI (LODR) Regulations 2015.


may be accepted. Further, to

take care of any other SEBI

regulations which may evolve in

future with regard to issuance

of debt securities, it may be

mentioned that the timelines as

given in any other SEBI

regulations may be added. The

provisions as given in


modified accordingly.

(ix) With regard to point no. "s",

SEBI (Listing Obligations and

Disclosure Requirement),

Regulations, 2015 may be added

in the provision.

Public Comment accepted. (viii)


(ix) may be accepted as it is

observed that SEBI (LODR)

Regulations, 2015 are in force.

Therefore, necessary changes

may be made in the proposed

amendment.












debenture holders;












therefor;



event of:





for debentures; or


debentures.







breach;









reserve.








those





enforceable;



debentures.




to be held;











holders.




























Listing of Debt


(Listing








dates;




debentures;




















to debt issue.























(Share Capital and









(c), (j), (g), (l)and (i),



Act, 2013.














companies.








secured by way of






NBFCs/ HFCs etc.


harmonization with


proposed to amend





trustees.





corporate;

(b) [deleted]




deed;

(ca) supervise the




the debentures and


reserve, wherever

applicable;



holders;



security becomes

enforceable;









itself that the—
















accordance with the

provisions of the

Companies Act;


interest due on the


despatched to the






redemption of the

debentures;














trustee;]




provisions of the













accordance with the




holders;




any law;




of:







of debentures;





the body corporate,




taken therefor.

Page 6 of 9





comments)


Amendment



(xi) With regard to point no. "t",

the books of the accounts of the

listed entities issuing debenture

are subject to limited review by

statutory auditors every quarter

which brings out the financial

state of affairs of the Company.

Further, in notes to quarterly

financial results, the Listed

companies provide the amount

of outstanding NCDs with asset

cover details. Therefore,

requirement of Certificate from

an independent chartered

accountant and certificate from

the statutory auditor may be

deleted as it will increase the

compliance cost of the Company

in addition to the existing fees.


(x) With regard to the public

comment at point no. (xi), the

provision regarding obtaining

Certificate from the statutory


debts / receivables on yearly

basis may be retained as the

statutory auditor are in a better

position to comment on the

financial position of the

Company.












debenture holders;












therefor;



event of:





for debentures; or


debentures.







breach;









reserve.








those





enforceable;



debentures.




to be held;











holders.




























Listing of Debt


(Listing








dates;




debentures;




















to debt issue.























(Share Capital and









(c), (j), (g), (l)and (i),



Act, 2013.














companies.








secured by way of






NBFCs/ HFCs etc.


harmonization with


proposed to amend




(ix) With regard to the public

comment at point no. (x), the

provision regarding obtaining

Certificate on quarterly basis

from director/managing

director may be retained as

they, being part of the issuer

company, are in a better

position to comment on the

financial position of the

Company. Also, certificate from

independent CA would render

fairness in such certificates.


mentioned in the consultative

paper may be retained.

(x) With regard to point no. "t",

certificate may also be taken

from an independent chartered

accountant or practicing

company secretary as similar

provision is present in Regulation

56(1)(d) of SEBI (LODR)

Regulations.



trustees.





corporate;

(b) [deleted]




deed;

(ca) supervise the




the debentures and


reserve, wherever

applicable;



holders;



security becomes

enforceable;









itself that the—
















accordance with the

provisions of the

Companies Act;


interest due on the


despatched to the






redemption of the

debentures;














trustee;]




provisions of the













accordance with the




holders;




any law;




of:







of debentures;





the body corporate,




taken therefor.

Page 7 of 9





comments)


Amendment



8 Regulation : 17(1)

Maintenance of books of

account, records,

documents, etc.

17.(1) Subject to the

provisions of any law every

debenture trustee shall

keep and maintain proper

books of account, records

and documents, relating to

the trusteeship functions

for a period of not less than

five financial years

preceding the current

financial year.

(2) ....

Maintenance of books of account,

records, documents, etc.

17.(1) Subject to the provisions of

any law every debenture trustee

shall keep and maintain proper

books of account, records and

documents, relating to the

trusteeship functions for a period

of not less than five financial years

from the date of redemption of

debentures.

(2) ....

Since there may be investors’

complaints/ grievances etc.

regarding the payment of

redemption amount, it is

proposed that the books and

records shall be maintained

for a period of not less than

five financial years from the

date of redemption of

debentures.

Therefore, Regulation 17(1)



Since there may be investors’

complaints/ grievances etc.

regarding the payment of

redemption amount, the

amendment proposes to

mandate the debenture

trustees to keep the records for

a period of not less than five

financial years from the date of

redemption of debentures

subject to the provisions of any

law.

As the regulations talk about

"Issuers' Auditor", the issuers

insist on providing certificate

from ‘Internal Auditors’

‘Concurrent Auditors', etc.

and not Statutory Auditors.

Since, the Statutory Auditor

has fiduciary duties towards

the Shareholders of the

Company and they are in a

better position to comment

on the financial position of

the Company, it is proposed

to modify the clause to

mandate the Debenture

Trustees to obtain certificate

of end-utilisation of issue

proceeds from the Statutory

Auditor of the issuer

company.

Therefore, Regulation

15(1A)(c) may be replaced as

stated.

Public Comment not

accepted.The public comments

at point no. (i) is technical in

nature, thus, may not be

accepted. Thus, the proposal as


Paper may be retained

(i) There are numerous

provisions in the DT Regulations

at different places (Reg. 15 (1)

(k), 15 (1A) (b) and (c)) with

respect to the monitoring and

obtaining certificates for end

utilization of funds. All these

provisions need to be combined

at one single place with

exhaustive requirements.

15(1A) The debenture trustee

shall:

(a) ....

(b) ....

(c) obtain a certificate from the

issuer's Statutory Auditor:

(i) in respect of utilisation of funds

during the implementation period

of the project; and

(ii) in the case of debentures

issued for financing working

capital, at the end of each

accounting year.

Regulation : 15(1A)(c)

15(1A) The debenture

trustee shall:

(a) ....

(b) ....

(c) obtain a certificate from

the issuer's auditors:

(i) in respect of utilisation

of funds during the

implementation period of

the project; and

(ii) in the case of

debentures issued for

financing working capital, at

the end of each accounting

year.

7

Page 8 of 9





comments)


Amendment



Liability for action in case of

default.

25. (1) A Debenture Trustee which-

(a) fails to comply with any

conditions subject to which

certificate has been granted;

(b) contravenes any of the

provisions of the Act or these

regulations;

(c) contravenes the provisions of

the Companies Act or the rules

made there under;

(d) fails to furnish any information

relating to its activity as a

Debenture Trustee as required by

the Board;

(e) furnishes to the Board

information which is false or

misleading in any material

particular;

(f) does not submit periodic

returns or reports as required by

the Board;

(g) does not co-operate in any

enquiry, inspection or

investigation conducted by the

Board;

(h) fails to resolve the complaints

of investors or fails to give a

satisfactory reply to the Board in

this behalf;

shall be dealt with in the manner

provided under the Securities and


(Intermediaries) Regulations,

2008.

(2) Sub-regulation (1) shall not

prejudice the powers of the Board

to issue directions or measures

under sections 11, 11B, 11D, sub-

section (3) of section 12 or section

24 or Chapter VIA of the Act or

under any other law for the time

being in force.

Regulation : 25

Liability for action in case of

default.

25. A debenture trustee

who—

(a) fails to comply with any

conditions subject to which

certificate has been

granted;

(b) contravenes any of the

provisions of the Act, rules

or regulations;

(c) contravenes the

provisions of the

Companies Act or the rules

made thereunder, shall be

dealt with in the manner

provided under 51[Chapter

V of the Securities and


(Intermediaries)

Regulations, 2008]

9 Regulation 25 is proposed to

be modified to streamline it

with other SEBI Regulations

so as to have consistency

with regard to the liabilities

for actions in case of default.

Therefore, Regulation 25 is

proposed to be replaced as

stated.


The proposed amendment

proposes to streamline the

liabilities for actions against

debenture trustees in case of

default/ non-compliance with

other SEBI Regulations so as to

have consistency. Therefore,

the proposal as mentioned in

the Consultative Paper may be

retained

Page 9 of 9

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