SEBI revises framework for green debt securities

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– Alignment with international standards and avoidance of greenwashing

– Payal Agarwal and Shreya Salampuria | corplaw@vinodkothari.com

Sustainability labeled bonds, more popularly known as GSS+ bonds, are looked upon as one of the primary means of raising funds towards sustainable development. The same has been discussed in Sustainable finance and GSS+ bonds: State of the Market and Developments. India is also not oblivious to the concept of GSS+ bonds, and companies in India have also been issuing such bonds, in one or more forms.

The issuance of green debt securities (“GDS”) in India was initially formalized through a circular issued  by SEBI in 2017 in this regard, later absorbed under the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“ILNCS Regulations”) read with Chapter IX of the Operational Circular on the same. The regulatory framework for GDS in India has since been reviewed, and following a Consultation Paper on Green and Blue Bonds as a mode of Sustainable Finance (“Consultation Paper”) dated 4th August, 2022, SEBI, in its meeting dated 20th December, 2022 (“Board Meeting”) has approved amendments to the existing regulatory framework for GDS issuance. The press release of the Board Meeting reads as “in the backdrop of increasing interest in sustainable finance in India as well as around the globe, and with a view to align the extant framework for green debt securities with the updated  Green  Bond  Principles (GBP) recognised by IOSCO, SEBI undertook a review of the regulatory framework for green debt securities.”

Pursuant to the review of the regulatory framework for GDS, the following has been notified –

In this write-up, we intend to discuss the revised regulatory framework for GDS issuance in India.

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SEBI notifies amendments to all modes of Buy-back

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– Sanya Agrawal, Executive | executive@vinodkothari.com

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Read our related write-up on Buyback here:

  1. SEBI’s revised framework brings relaxation under buy-back norms

SEBIs Consultation Paper on review of CG norms for a High Value Debt Listed Entities

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– Shreya Salampuria, Executive | corplaw@vinodkothari.com

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Read our comments to SEBI on the said consultation paper:

  1. Comments on SEBI consultation paper on CG norms in HVDLEs

SEBI to provide debenture holders the right to object material related party transactions

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Complicates approval process for closely held High Value Debt Listed Entities

– Vinita Nair, Senior Partner | vinita@vinodkothari.com

SEBI continues to tighten the regulatory regime for debt listed entities as it aims to promote corporate bond market. After equating debt listed entities with outstanding value of listed non-convertible debt securities of Rs. 500 crore and above with equity listed entities for the purpose of corporate governance norms, SEBI proposes a stricter approval regime for Related Party Transactions (‘RPTs’) under Reg. 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR’) vide Consultation paper on review of Corporate Governance norms for a High Value Debt Listed Entity (‘HVDLE’)[1]. This has been rolled out just before the corporate governance provisions become applicable on a mandatory basis effective from April 1, 2023. The composition of 138 HVDLEs, in terms of shareholding pattern, as on March 31, 2022 was as under:

Figure 1: Analysis of shareholding pattern of the HVDLE
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Online workshop on Recent amendments relating to Corporate Bonds

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Click here to register for the workshop: https://forms.gle/V8SRUpDpsSMYraBx9

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Identification Of Related Parties Of Subsidiaries

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Which law to follow? – Listing Regulations or laws applicable to subsidiaries?

– Aisha Begum Ansari, Manager | aisha@vinodkothari.com

The RPT provisions under the SEBI Listing Regulations were substantially amended by SEBI on November 9, 2021. Pursuant to the amendment, the definitions of related party, RPT, material RPT, requirements of obtaining audit committee, and shareholders’ approval were changed.

The definition of ‘RPT’ was amended to include cross RPTs. Earlier, only transactions between the listed entity and its related parties were covered, but now, the following transactions are also covered:

  1. Transaction between listed entity and its related parties;
  2. Transaction between the subsidiaries of listed entity and its related parties;
  3. Transaction between listed entity and related parties of subsidiaries;
  4. Transaction between subsidiaries and related parties of listed entity;
  5. Transaction between subsidiaries and related parties of other subsidiaries.
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SEBI amends NCS Regulations – DT nominated director | Green Debt Securities | Public issue offer period

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– Ajay Ramanathan, Executive | ajay@vinodkothari.com

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National financial information repository: One more or one for all?

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– Lovish Jain, Executive | lovish@vinodkothari.com

Some days ago, Mr. Vinod Kothari had commented on a LinkedIn post :

“Do we realise how many places does a lender (NBFC, Bank) register information about a loan? There are 4 credit information companies (such as CIBIL) where the credit data, including performance history, is uploaded. If the exposure is Rs 5 crores or above, in the aggregate over the banking system, information goes on CRILC too.

RBI has recently written to NBFCs reminding them of the obligation to register details with NeSL, an information utility under IBC, irrespective of whether the provisions of Code apply (for example in case of individuals), or whether the lender in question is at all contemplating resorting to IBC as a remedy (for example, consumer loans).

If the loan is a secured loan, the details need to be filed with CERSAI. If the secured loan borrower is a company, details need to be filed with RoC too. If the security interest is on immovable property, one needs to file particulars with land registry. If the security interest is on motor vehicles, the hypothecation is registered with Vahan portal too.

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Corporate law changes: small steps towards procedural simplification 

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– Anushka Vohra, Manager | corplaw@vinodkothari.com

The Budget 2023, proposes certain amendments, partly towards ease of doing business, and partly for certain rationalization measures.

The major amendments proposed are as follows:

  1. CSR expense not to result into GST set off

We had in our previous article, dealt with the question whether,GST paid, while acquiring goods or services for CSR activities would give rise to an input tax credit. Section 17(5)(h) of the CGST Act excludes “goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples” for the purpose of availing ITC on payment of GST. The term ‘gift’ is not defined anywhere in the CGST Act. However, in layman’s language, gift means a thing given willingly to someone without payment.

While, there isn’t any explicit clarification to say whether input tax credit will be available or not, we relied on certain judicial pronouncements, some of which confirmed the availability of ITC benefit, and some denied it.

The Budget 2023, proposes that section 17(5) of the CGST Act shall be amended to the effect that input tax credit shall not be available in respect of goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013.

Hence, in case of the company being subjected to the obligation of spending on CSR, the GST benefit will be denied to the company. The expression is clearly related to the obligation under CSR in terms of sec. 135 – therefore, this denial of ITC benefit will be applicable only in case of the company.

The effective date of the amendment will be 1st April, 2023. Hence, once the Budget proposals are passed, any acquisition of goods or services for CSR purposes will be denied the benefit of GST set off.

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India’s “green growth”: is the green skin-deep?

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– Payal Agarwal, Deputy Manager | corplaw@vinodkothari.com

Talking about green growth may seem like rhetoric. From policy-makers to economists, from corporate governance experts to environmentalists, everyone seems to be having “green growth” on the top of the agenda.

The Economic Survey dedicated a full chapter to climate change and related issues. The Budget also has green growth as one of the seven saptarishis, to guide the FM’s plans for our financial future.

Need of the hour

India has been taking small steps towards reaching its commitment to the net-zero emissions goal by 2070, as compared to a majority of countries committing to reach the net-zero targets by 2050. While the country contributes to a very low percentage of global emissions (only 4% of the cumulative global emissions from the period 1850-2019[1]), the global nature of the problem of climate change is what makes the country equally vulnerable to the problem, if not more. Further, given its long coastline, monsoon-dependent agriculture, and large agrarian economy, India is considered to be one of the most vulnerable countries to the climate change issue[2].

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