Enhanced guidelines for debenture trustees and listed issuer companies on security creation and initial due diligence

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....y creation and initial due diligence 1. The SEBI Board, in its meeting on September 28, 2020, approved changes to the regulatory framework relating to debenture trustees (DTs), enhancing their role. Resultant amendments were made in the SEBI (Debenture Trustees) Regulations, 1993, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and erstwhile SEBI (Issue and Listing of Debt Securities) Regulations, 2008 [Replaced by the SEBI (Issue and Listing of Non-convertible securities) Regulations, 2021], pursuant to which a circular [Circular no. SEBI/HO/MIRSD/CRADT/CIR/P/2020/218 dated November 03, 2020] on the creation of security and due diligence by DTs was issued. 2. Since the issue of the circular, SEBI has received....

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....vember 12, 2020 and SEBI Circular No. SEBI/ HO/ MIRSD/ CRADT/ CIR/ P/ 2022/ 67 dated May 19, 2022 for continuous monitoring and any other stipulations of SEBI from time to time with respect to security creation, initial due diligence and continuous monitoring by DTs. 4.2. A DT shall carry out due diligence for change in security, creation of security/ additional security in the manner as prescribed in para 4 to para 7 of SEBI Circular dated November 03, 2020. Pursuant to the initial due diligence carried out as per para 4-7 of SEBI Circular dated November 03, 2020, the DT shall issue a no-objection certificate (NOC) to issuer company for going ahead with proposed change in the structure/ creation of security. 4.3. Thereafter, the issu....

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....all share the information with respect to change in ISIN of debt securities, with the recognized Stock Exchanges. B. Encumbrance on securities for issuance of listed debt securities: 5. Creation of encumbrance on the securities for securing the non-convertible debt securities shall be through the depository system only in accordance with the Depositories Act, 1996, the SEBI (Depositories and Participants) Regulations, 2018, Depository bye laws and other applicable regulations and circulars. 6. Encumbrance for the above shall mean the following: 6.1. Pledge, hypothecation, lien, negative lien, non-disposal undertaking or non-disposal agreement; 6.2. Any restriction on the free and marketable title to securities, by whatever na....

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....monitoring in terms SEBI Circular dated November 12, 2020 as well as this circular, DTs shall: 8.1. Adopt an empanelment criterion/ policy as approved by their board of Directors and shall disclose the same on their website. 8.2. Formulate a policy on mitigating conflict of interest and shall disclose the same on their website; the policy shall, inter-alia, include a requirement that the empaneled agency would have no pecuniary relationship with the issuer company 3 years prior to the issue. E. Compliance with SEBI Circulars on 'Security & Covenant Monitoring System' 9. In order to ensure efficient recording of details regarding creation of security and monitoring of covenants via the system hosted by Depositories using the Dist....