SEBI Issues operational guidelines for security and covenant monitoring using DLT

Information regarding assets offered as security (Security creation/ Security Cover)

Para 6.1 & 6.2 of SEBI Circular dated August 13, 2021

Issuer shall record relevant details regarding proposed Security creation/ Security Cover (if applicable) including asset details, other related documents in the system based on the type of asset offered for security creation.

Note:

i.        The assets offered as security by an Issuer shall be recorded in the system pursuant to validation/ verification by DT(s) in terms of SEBI Circular dated November 03, 2020 or any other relevant circulars.

ii.      In case of any discrepancy the system shall send an intimation to the issuer to rectify or record additional details, before initiating issuance of temporary ISIN/ISIN.

iii.     The following assets shall be tracked at portfolio level:

a.      Moveable assets viz. Furniture, equipment, inventory etc.

b.      Current assets viz, Portfolio of advances/receivables, etc.

c.       Any other asset of similar nature.

iv.     DLT system will provide an alert to the Issuer and the DT by having appropriate validation/ duplicate checks in the system for identifying possible duplicate entries for assets of an issuer and this validation/duplication check shall be based on the parameters as per Annexure-II as per SEBI Circular dated March 29, 2022.

v.      On detection of duplicate/ near duplicate asset, an alert shall be generated and sent to the Issuer and DT to cross check and verify the details entered into the system for assets creation. The Issuer and the DT will be able to override the alert after verifying the same.

Annexure A1

At the time of creation of temporary ISIN/ ISIN.

As per Para 2, 3 & 5 of SEBI Circular dated March 29, 2022:

1.      A system generated unique identifier (Asset ID) shall be allotted for each asset offered by Issuer as security for the non-convertible securities;

2.      Issuers shall ensure that the entry of the asset is made only once in the DLT system for generation of the unique Asset ID, which shall be verified by the DT;

Recording of charge creation and charge registration details on the system

Para 7.1 and 7.3 of SEBI Circular dated August 13, 2021

Pursuant to creation of charge in favour of DT (as per provisions of SEBI Circular dated November 03, 2020), the Issuer shall upload the details of the charge created on the system along with all the relevant documents supporting the charge such as Pledge Master Report etc.

Issuer shall upload due diligence certificate given by the DT as per Annexure B of SEBI circular dated  November 03, 2020

Annexure A2

Approval of DT for modification in charge creation, registration details on the system

Para 8.1 of SEBI Circular dated August 13, 2021

Any change in already recorded information on the system related to charge creation, registration details etc. due to any discrepancy or any modification in the value or details of the security provided on account of provision of additional security by Issuer or reduction or substitution of existing security provided by the Issuer, shall be made after approval of DT and information on requisite documents and permission/ consent obtained shall also be recorded on the system.

Event based

Recording of covenants in the system

Para 10.1 of SEBI Circular dated August 13, 2021

The Issuer shall enter the covenants of the issuance in the system and upload the Debenture Trust Deed, including but not limited to the following:

a.      Covenants as to title of Security/ asset;

b.      Covenants as to Security Cover as per terms of Issue;

c.       Omitted vide SEBI circular dated March 29, 2022.

d.      Covenant as to further borrowing/ issues;

e.      Covenant as to creation of further encumbrances on the security

f.       Financial covenants including any restrictions on payment of dividends, maintaining Debt/equity ratio, Gross Debt to EBITDA, Debt to Value Ratio etc

g.      Covenants as to any change in nature and conduct of business

h.      Covenants with respect to changes in the composition of its Board of Directors

i.        Monitoring of Debenture Redemption Reserve, Debenture Redemption Fund, Recovery Expense Fund

j.        Other non-financial covenants such as credit rating, negative lien undertaking, etc

Within five working days of signing of Debenture Trust Deed

DT shall validate within 7 workings days of signing the DTD.

Any event which reduces the security cover below the mandated/ stipulated limit,

as per regulation 54 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, shall be updated by the issuer in the system immediately. Such event shall be termed as ‘trigger event’

Furnishing half yearly certificate for security cover.

Para 11 of SEBI Circular dated August 13, 2021

Issuer shall provide the half yearly certificate by the statutory auditor specifying the security cover and upload the same on the system in format as specified vide SEBI Circulars from time to time.

Within 45 days (for HY ending September 30)/ 60 days(for HY ending March 31) as specified under the provision of SEBI (LODR) Regulations, 2015

Asset cover format as required under Regulation 54 of SEBI LODR, 2015 is yet to be prescribed by SEBI, however, the reference to asset cover has been deleted vide SEBI circular dated March 29, 2022.

Further, there is no prescribed format for Security cover.

Para 12 of SEBI Circular dated August 13, 2021

The Issuer shall upload on a periodic basis the necessary and applicable documents, information within stipulated time so as to enable DT(s) to exercise the above functions as per terms and timelines set out in SEBI Circular dated November 12, 2020 or any other Circular issued by SEBI.

Kindly refer Annexure-I.

Information pertaining to Interest and Principal payment.

Para 14.1 of SEBI Circular dated August 13, 2021

The Issuer shall record information pertaining to interest and principal payment on the system at the time of creation of ISIN/ temporary ISIN.

Issuer shall also record the status of payment of non-convertible securities after taking requisite details from Registrar and Transfer Agent.

As per Para 1 of Annexure A3 at the time of creation of temporary ISIN/ISIN.

As per Para 2 of Annexure A3 within one working day of payment/ redemption due date.

Redemption of Non-convertible securities

Para 16.1 of SEBI Circular dated August 13, 2021

Issuer shall initiate the release of charges along-with the relevant documents in the system including but not limited to Statutory Certificate, No dues from the Debenture Holders (applicable only in case of private placement), ISINs Extinguishment letter, ROC Charge Satisfaction forms/certificate.

No timeline prescribed.

No dues from the debenture holders to be sought

Uploading of Credit Rating information

Para 17 of SEBI Circular dated August 13, 2021, read with Para 7 c of SEBI circular dated March 29, 2022.

1.      Issuer shall upload all the credit rating information for non-convertible securities including rating action, date of press release and hyperlink for press release of credit rating.

2.      CRAs shall access the platform to validate the rating information uploaded by the Issuer, in case of any discrepancy issuer or CRA shall update the correct information within 3 working days.  

1.         No timeline prescribed, should be done promptly

2.         In case of any discrepancy, update the correct information in the system within three working days of such notification.

Para 18 of SEBI Circular dated August 13, 2021

Any subsequent rating actions carried out by CRAs shall be recorded in system by the

Issuer which shall inter-alia include rating action including rating outlook, date of press release and hyperlink for press release of credit rating.

1.      Within one working day of the press release.

2.      In case of any discrepancy, Issuer or CRA shall notify the same on system and CRAs shall update the correct information in the system within two days of such notification.