Securities and Exchange Board of India (Sebi) on Friday strengthened the guidelines for debenture trustees with respect to listed securities. The requirements pertaining to encumbrance, creation of security and related due diligence that needs to be carried out by Debenture Trustees (DTs) have been revised.
In a circular issued by the regulator, it said that Debenture Trustees will have to put in place an empanelment policy for empanelling external agencies for carrying out due diligence. Besides, Debenture Trustees (DT) have to formulate a policy on mitigating conflict of interest and disclose the same on their websites. The policy should include a requirement that the empanelled agency would have no pecuniary relationship with the issuer company three years prior to the issue, the regulator said.
The regulator further said that before initiating due diligence, a DT and the listed entity will have to enter into an amended debenture trust agreement with respect to security creation, initial due diligence and continuous monitoring by the DT concerned. Post carrying out the initial due diligence, the DT would have to issue a no-objection certificate to the issuer company for going ahead with proposed change in the structure or creation of security.
After creation and registration of charge, the issuer company and the DT concerned would have to enter into an amended debenture trust deed. The latter should include all the terms and conditions arising out of the due diligence carried out by the DT, and the security created by the issuer company. The issuer company, following the execution of amended debenture trust deed, will have to submit certain documents to the depositories and stock exchanges.
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