Amendments relating to issue and listing of Non-Convertible securities - MMJC

Securities and Exchange Board of India (“SEBI”) has amended Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“SEBI ILNCS”) by way of its amendment notification dt: February 3, 2023.

The highlights of this amendment are as follows:-

• Debenture trustees already have powers to appoint nominee director on the board of directors of the issuer to protect the interest of debenture holders.

SEBI has now mandated issuers to ensure that debenture trust deed as well as Articles of Association (in case of issuers who are companies) contains a provision, mandating the issuer to appoint the Nominee Director at the earliest and not later than one month from the date of receipt of nomination from the debenture trustee(s).

• Issuers whose debt securities are already listed have been mandated to amend the trust deed as well as Articles of Association (if necessary) to incorporate the above provision on or before September 30, 2023. [Reg 18(6A) and Reg 23(6)]
• Issuers who are in default of payment of interest or repayment of principal amount in respect of listed debt securities, shall appoint the Nominee Director, within one month from date of receipt of nomination from the debenture trustee or February 3, 2023 (i.e. date of publication of amendment in official gazette), whichever is later [Reg 23(6)].
• The manner of sending notice to eligible non-convertible securities holders and debenture trustees regarding right to recall or redemption before maturity has been specifically prescribed, i.e., soft copy to those who have registered their email id, with the listed entity or with depository and hard copy to those who have not registered their email id. [Reg 15(6)]
• In above cases, the requirement of publishing this notice in English and regional national daily newspapers is done away with. [Reg 15(7)]
• Additional projects / categories have been prescribed for which ‘green debt security’ can be issued subject to such conditions for fund-raising as may be prescribed by SEBI. A circular on Dos and Don’ts relating to green debt securities to avoid occurrences of green washing has also been released on February 3, 2023. [Reg 2(1)(q)]
• Offer period in case of public issue of debt securities or, non-convertible redeemable preference shares shall be minimum of three working days and a maximum of ten working days. In case of revision of price band or yield, minimum 3 working days extension can be given. In case of force majeure, banking strike or similar circumstances, extension can be given. But in no case, overall bidding (issue) period shall exceed 10 working days [Reg 33A]
• Designated stock exchanges are empowered to collect regulatory fee from an issuer of perpetual debt instruments, perpetual non-cumulative preference shares and similar instruments at the time of their listing. [Reg 50(5)]

The detailed newsletter on these amendments shall be covered in our forthcoming MMJC Insights.