We have attempted to collate all major regulatory amendments notified throughout the year, with our resources on the same. Below we present a regulatory round-up for the year 2021, be it for MCA, SEBI, RBI or the like, along with the links to our major articles/ FAQs on the same.
Our youtube video giving a quick view on the same can be accessed at – https://www.youtube.com/watch?v=WJbJx2jgK9A
This version: 4th December, 2021
Our resources can be accessed through below links:
Links to SEBI circulars and amendments:
Last updated on 5th October, 2021
Anushka Vohra | Deputy Manager
The SEBI (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2021[1] have increased the compliance burden on the debt listed entities. Ranging from introducing the corporate governance requirements on High Value Debt Listed Entities (HVDLEs)[2] to increasing the disclosure and compliance requirements on all debt listed entities, the amendment per se aims to make the current regulatory requirements stringent on the debt listed entities.
One significant amendment under Chapter V, which is applicable on all debt listed entities, is the requirement of submission of financial results on a quarterly basis instead of a half yearly basis, as was previously the requirement. With this write-up, we will try to understand the implications on the debt listed entities due to change in the periodicity of submission of financial results and the required actionables.
As per the amendment, the debt listed entities will be required to prepare the quarterly and annual financial results, as per the format specified by the Board. The Board has on October 05, 2021, specified the format[3] to be followed by the entities whose non-convertible securities are listed. Our snapshot on the same can be accessed here. It is pertinent to note that while the line items remain the same, the periodicity seems to be exactly similar to the erstwhile format which was applicable on entities that have listed their equity shares / specified securities.
A snapshot of the format is as under:
Since the time the amendment has been introduced, it was quite anticipated that the format would be similar to what was initially applicable to entities that have listed their equity shares / specified securities. The secretarial team of companies were struggling with the same, however the SEBI circular has put to rest the concerns and has, by way of a note clarified that, in case the debt listed entities do not have corresponding quarterly financial results for the four quarters ended September, 2020, December, 2020, March, 2021 and June, 2021, the column on corresponding figures for such quarters will not be applicable.
Non-convertible securities include debentures which are not convertible into equity at any given time and constitute a debt obligation on the part of the issuer. Chapter V of the SEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) is applicable to entities that have listed their non-convertible securities on the stock exchange(s). Regulation 52 of the Listing Regulations deals with the preparation and submission of financial results
The extant Regulation provided that such listed entity shall submit financial results on a half yearly basis, within 45 days from the end of half year i.e; within 45 days from the end of September & March [for entities following FY April-March]. For the first half year the requirement was mandatory but SEBI provided a relaxation for second half year, whereby it was stated that such listed entity may not be required to submit unaudited financial results for the second half year, if it intimates in advance to the stock exchange(s), that it shall submit its annual audited financial results within 60 days from the end of financial year. Akin to such relaxation, SEBI provided that if such a listed entity submits the unaudited financial results within 45 days from the end of the second half year, the annual financial results may be submitted as and when approved by the board of directors.
Extant framework
| Unaudited accompanied with limited review report | Audited financial results + statements + Auditor’s Report (AR) | |
| For the first half year (have to be mandatorily given) | For the second half year (whether submitted / not) | |
| Yes | No | Within 60 days from end of financial year |
| Yes | Yes | As soon as approved by the board |
Now, since the periodicity has changed from half yearly to quarterly, such listed entities will be required to submit financial results within 45 days from the end of each quarter, other than the last quarter and the annual financial results within 60 days from the end of the financial year.
New framework
| Unaudited accompanied with limited review report | Audited financial results + statements + AR | |||
| For the first quarter* | For the second quarter* | For the third quarter* | For the fourth quarter** | |
| Yes | Yes | Yes | No | Within 60 days from end of financial year |
*mandatorily required
**not required
It is an irrefutable fact that debt in India is mostly privately placed which primarily involves the Qualified Institutional Buyers (QIBs) and no prejudice is caused to the public at large. Keeping that in mind, the debt listed entities were treated differently from the equity listed entities and were not subject to the such stricter compliances when compared to debt listed entities.
In view of SEBI’s approach during recent times, , it has put an end to the easy going voyage of a debt listed entity and they have been placed at par with the equity listed entities.
Regulation 50 dealing with intimation to stock exchange(s) has been amended and now require the debt listed entities to intimate to the stock exchange(s) at least 2 working days in advance, excluding the date of board meeting and date of intimation, of the board meeting where the financial results shall be considered (quarterly / annually). This Regulation 50 corresponds to Regulation 29 which is applicable to equity listed entities.
Further, in case of equity listed entities, Regulation 30 (read with Schedule III Part A) is a cumbersome Regulation as the same requires certain events to be disclosed as and when they occur. For debt listed entities, the corresponding Regulation is Regulation 51 (read with Schedule III Part B). Unlike Regulation 30, the list under Regulation 51 (i.e; under schedule III) was narrow in its scope, however, with the said amendment, the list under the Part B of Schedule III, applicable on debt listed entities has also been amended to streamline the same with what is applicable on equity listed entities.
Furthermore, while submitting the financial results (quarterly / annually) under Regulation 52, the debt listed entities have to provide certain information. Such information is captured under Regulation 52(4) and includes the following:
Exemption : Non Banking Financial Companies (NBFCs) which are registered with the RBI were exempted from making disclosure of interest service coverage ratio, debt service coverage ratio and asset cover. However, exemption from disclosure of asset cover has been withdrawn i.e; now the NBFCs that have listed their debt securities have to make disclosure of asset cover. Also, the exemption from disclosing interest service coverage ratio and debt service coverage ratio is now also extended to Housing Finance Companies (HFCs) registered with the RBI.
This new framework is now in sync with what is applicable to equity listed entities. The Regulator’s intent to subsume the compliances applicable on equity and debt listed entities seems to have been inspired by the need for more transparency and promptness of information. However, this sudden drift calls for certain actionables on the part of debt listed entities.
A summary of actionables can be represented as under:
The entities that have listed their equity shares / convertible securities i.e; specified securities are covered under Chapter IV of the Listing Regulations, subject to exemptions under Regulation15. These entities have to comply with Regulation 33 for preparation and submission of financial results and the timeline for the same is quarterly. There has been no change for such listed entities as far as the financial results are concerned.
However, since the amendment has made Chapter IV applicable on HVDLEs which are debt listed entities covered under Chapter V, these HVDLEs have to comply with both Regulation 33 and Regulation 52. But since the requirements in both these regulations have been streamlined, no impact will be caused on such HVDLEs.
Such entities are governed by both Chapter IV and Chapter V, thus w.r.t. financial results they have to comply with both Regulation 33 and Regulation 52. Prior to such amendment, such listed entities followed the quarterly preparation and submission of financial results, since the same is stricter. For all other provisions which are common among both chapters but vary in timelines, the one with the stricter provision needs to be followed. For instance, in case of prior intimation of board meetings where financial results shall be considered, Chapter IV provides advance intimation of 5 days, whereas Chapter V provides advance intimation of 2 working days. Clearly, the timeline of 5 days in advance is stricter, therefore such entities shall comply with the same.
The sense of ease on the debt listed entities has been undone and the Regulator is preparing to bring the equity and debt listed entities under the same blanket. The extension of Chapter IV on HVDLEs seems to be a wake up call for debt listed entities which are not HVDLEs as of now. The enhanced disclosure on all debt listed entities would nevertheless burden them, however the impact of the same is yet to be analysed.
Our snippet on the same can be accessed at – https://vinodkothari.com/2021/10/quarterly-financial-results-for-debt-listed-companies/
Our other resources on related topics –
[1] https://www.sebi.gov.in/legal/regulations/sep-2021/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-fifth-amendment-regulations-2021_52488.html
[2] A listed entity which has listed its non-convertible debt securities and has an outstanding value of listed non-convertible debt securities of Rs. 500 crore & above as on March 31, 2021.
[3] https://www.sebi.gov.in/legal/circulars/oct-2021/revised-formats-for-filing-financial-information-for-issuers-of-non-convertible-securities_53136.html
Other ‘I am the best’ presentations can be viewed here
Our other resources on related topics –
Non-convertible debentures issued on private placement basis are one of the most practiced ways of raising finance by the companies in India. Considering the notification of SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, effective from 16th August, 2021, the companies may be under a perplexity of how to comply with the requirements of the newly notified regulations. We have summarised the procedure into a checklist below for reference.
| Checklist for issuance of listed and unsecured NCDs on Private Placement Basis | |||
| Serial No. | Particulars | Relevant provisions | Remarks |
| Eligibility conditions: A. Eligibility requirements under the Companies Act, 2013: 1. Offer can be made to a maximum of 200 persons 2. No advertisement can be made in the newspapers 3. The Company shall not make a fresh offer or invitation unless the allotment with respect to any offer or invitation made earlier have been completed, or withdrawn or abandoned by the Company. B. Eligibility requirements under SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 No issuer shall make an issue of non-convertible securities if as on the date of filing of draft offer document or offer document: (a) the issuer, any of its promoters, promoter group or directors are debarred from accessing the securities market or dealing in securities by the Board; (b) any of the promoters or directors of the issuer is a promoter or director of another company which is debarred from accessing the securities market or dealing in securities by the Board; (c) any of its promoters or directors is a fugitive economic offender; or (d) any fine or penalties levied by the Board /Stock Exchanges is pending to be paid by the issuer at the time of filing the offer document: |
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| 1 | Convening of a Board Meeting: i. To consider and approve issue of debentures including the terms and conditions of issue for the entire FY ; ii. To authorise the Board Borrowing Committee/ other relevant committee [Optional] for the following: a. Appointment of RTA and execute tripartite agreement [Reg 9] b. Appointment of Credit Rating Agency and obtain Credit Rating. [Reg 10] c. Opening of Separate Bank Account with Schedule Bank [Proviso to Section 42(6)]. d. To identify group of persons to whom Debentures are proposed to be issued [Section 42(2)] e. To approve Private Placement offer letter f.Appointment of Depository [Reg 7] g. For allotment of NCDs h. other matters relevant to the issue of NCDs i.To appoint a debenture trustee before the issue of letter of offer for subscription of the debentures [Reg 8] j. To obtain in-principle approval from stock exchanges [Reg 6] |
Section 179(3) of CA Section 42, 71 & SS-1 |
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| 2 | Approval of shareholders | Sec. 71, 42, Rule 14(1) of Companies (PAS) Rules,2014, Rule 18 of SHA Rules | not required if blanket approval already taken and issue is within the limit as per second proviso to Rule 2 of Companies (Prospectus and Allotment of Securities) Rules, 2016 |
| 3 | Filing of MGT-14 | Rule 14(1) of Companies (PAS) Rules, 2014 | Within 30 days of passing of the Board Resolution/ Shareholders resolution |
| 4 | a. Preparation and finalisation of Disclosure Document; b. Preparation and finalisation of DTD, DTA/ Debenture Subscription Agreement. |
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| 5 | Obtain consent from Trustee | Before issue of offer document | |
| 6 | To convene Board Borrowing Committee/ other relevant committee meeting for the following: a. Approval of draft offer document/ Disclosure Document/ Information Memorandum, Debenture Trust Deed, Debenture Trustee Agreement,Application Form b. Identification of RTA c. Approval of List of proposed Allotees d. Approval for opening of Escrow Account (if already opened then noting of the same) e. All other matter as delgated by the Board as mentioned in Point 1 above. |
Section 42(3) of CA with Rule 14 (3) of Companies (Prospectus and allotment of Securities) Rules, 2014 | In terms of Rule 18(1)(c) & (5) of the Companies (Share Capital and Debentures) Rules, 2014 [Section 71(5)], the debenture trustee shall be appointed and DTD shal be executed at any time within 60 days of allotment of debentures. Accordingly, this may be done after the allotment of NCDs also. |
| 7 | Creation of debenture redemption reserve | Section 71(4) read with Rule 18 (7)(b)(iv)(B) | The value of debenture redemption reserve shall be 10% of the value of outstanding debentures.
DRR shall not be required in case of NBFCs [Rule 18 (7) (iv)(A) of Deposit Rules |
| 8 | Creation of recovery expense fund | Reg 11 read with SEBI Circular https://www.sebi.gov.in/web/?file=https://www.sebi.gov.in/sebi_data/attachdocs/oct-2020/1603361431987.pdf#page=1&zoom=page-width,-16,792 | deposit an amount equal to 0.01% of the issue size with designated stock exchange upto a maximum of Rs. 25 lakhs. |
| 9 | Obtain credit rating | Reg 10 | |
| 10 | Agreement with depository for dematerialisation | Reg 7 | |
| 11 | Private placement offer-cum-application shall be sent to the identified investors | Sec. 42 of CA 13 | |
| 12 | Maintain a complete record of persons to whom the Private Placement offer letter is sent in form PAS-5. | Rule 14(4) of PAS Rules | |
| 13 | Receipt of application money | Section 42 of CA | |
| 14 | Filing of Master Creation form with NSDL/CDSL -for demat issuance | ||
| 15 | Filing of listing application with stock exchanges and debenture trustees – (a) Placement Memorandum; (b) Memorandum of Association and Articles of Association; (c) Copy of the requisite board/ committee resolutions authorizing the borrowing and list of authorised signatories for the allotment of securities; (d) Copy of last three years Annual Reports; (e) Statement containing particulars of, dates of, and parties to all material contracts and agreements; (f) An undertaking from the issuer stating that the necessary documents for creation of the charge, wherever applicable, including the Trust Deed has been executed within the time frame prescribed in the relevant regulations/Act/rules etc. and the same would be uploaded on the website of the designated stock exchange, where such securities have been proposed to be listed; (g) In case of debt securities, an undertaking that permission / consent from the prior creditor for a second or pari passu charge being created, wherever applicable, in favour of the debenture trustee to the proposed issue has been obtained; and (h) Any other particulars or documents that the recognized stock exchange may call for as it deems fit: |
Reg 44 | |
| 16 | Allotment of NCDs after holding a meeting of Borrowing Committee/ other relevant committee | Section 42 of CA | |
| 17 | Filing of PAS-3 with ROC | Section 42(8) read with Rule 14(6) of Companies Prospectus and allotment of securities) Rules, 2014 | |
| 18 | Payment of fees to stock exchanges | Reg 13(2) | at the time of listing |
This is a general checklist for companies desiring to list its debt securities. For NBFCs and HFCs, the requirements may differ depending upon their specifically applicable regulations.
Further, you may read our article on the NCS Regulations here.
A comparison of the NCS Regulations from erstwhile ILDS Regulations can be accessed here.
A presentation on the various structures of debt securities can be viewed here – https://vinodkothari.com/2021/09/structuring-of-debt-instruments/