Sebi extends date for due diligence framework for debenture trustees

Sebi extended the implementation date for framework for creation of security for listed debt securities and due diligence that needs to be carried out by debenture trustees

Amidst the situation arising out of COVID-19 pandemic, regulator Sebi on Thursday extended the implementation date for framework for creation of security for listed debt securities and due diligence that needs to be carried out by debenture trustees to April 1, 2021.

The markets regulator had come out with the framwork in November and it was to become effective from January 1, 2021.

However, after taking into consideration the representation received from debenture trustees (DT) and the challenges arising out of the prevailing business and market conditions due to COVID-19 pandemic, Sebi extended the implementation date of the circular to April 1, 2021.

As per the circular issued in November, among other requirements, the issuer will have to create charge as specified in the offer document in favour of the DT before making the application for listing of debt securities and also execute debenture trust deed (DTD) with the DT.

Stock exchanges had been directed to list debt securities only upon receipt of a due diligence certificate from DT confirming creation of charge and execution of the DTD.

The charge created by issuer will be registered with sub-registrar, registrar of companies, depository, among others, as applicable, within 30 days of creation of such charge.

In case the charge is not registered anywhere or is not independently verifiable, then the same will be considered a breach of terms of the issue by issuer, Sebi had said.

Besides, DTs will have to exercise independent due diligence and it places obligations on the DTs to ensure that the assets of the issuers are sufficient to discharge the interest and principal amount with respect to debt securities of issuers at all times.

DTs are required to issue ''due-diligence certificate'' as per a specified format.

DTs will have to maintain records and documents pertaining to due diligence exercised for a minimum period of five years from redemption of debt securities, the circular had said.