A MIX OF EASE AND BURDEN: SEBI’s latest regulatory push redefines the role of DTs and issuers
Palak Jaiswani, Manager and Lavanya Tandon, Senior Executive | corplaw@vinodkothari.com
Updated as on November 27, 2025
Regulatory reforms to ensure EoDB for Debenture Trustees are being discussed and implemented in phases since January, 2025. SEBI proposed amendments with respect to permissible activities of DTs, the manner of utilisation of Recovery Expense Fund, specified rights of DTs with corresponding obligations on issuers and introduction of a model debenture trust deed through a consultation paper (‘CP’) dated November 04, 2024, which were deliberated in its meeting held on December 18, 2024, and finally approved the revised proposals on June 18, 2025.
In this article, we have discussed threadbare the regulatory changes approved in June 2025 and notified in October, 2025 by SEBI and actionables arising therefrom for issuers & DTs, pursuant to amendments made in SEBI (Debenture Trustee) Regulations, 1993 (‘DT Regulations’), SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (‘NCS Regulations’) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR Regulations’) that become effective from October 27, 2025 for DT Regulations and LODR Regulations and October 28, 2025 for NCS Regulations. The 2nd tranche of amendments approved by SEBI are notified by three circulars issued on November 25, 2025 relating to terms and conditions for undertaking permissible activities by DTs (SEBI Circular 1), utilisation of Recover Expense Fund (SEBI Circular 2) and timelines for submission of details by issuers to DTs (SEBI Circular 3).
Permissible Activities for DTs [newly inserted Reg. 9C in DT Regulations and SEBI Circular 1]
Key issue:
SEBI primarily governs DTs through DT Regulations, which presently do not restrict DTs to undertake any activities. However, based on the revenue data of the top 5 DTs, SEBI raised a concern that DTs presently undertake other trusteeship activities, which are either regulated by other Financial Sectors Regulators (FSR) like (securitisation trustee, security trustee, public deposit trustee) or not expressly regulated by any authority (outside purview of SEBI such as being an escrow agent, facility agent, monitoring agent, trustee for unlisted NCDs), thus creating potential regulatory and systemic risks. Another limitation is that SEBI cannot effectively address investor grievances or issues arising from such unregulated activities.
Proposal:
SEBI proposed to allow DTs to undertake such activities (not regulated by SEBI) which are governed by any Financial Sector Regulator (FSR). However, any other unregulated activities are required to be hived off to a separate legal entity within 1 year. However, later on SEBI dropped the proposal of hiving off in its meeting in December 2024.
Present Amendment:
With respect to the term ‘Separate Business Unit’ (SBU) though not defined in the amendment, a reference can be drawn from the SEBI Board Agenda (Para 3.7.3.), now notified in SEBI Circular 1, which states that DTs shall undertake activities not regulated by SEBI through one or more Separate Business Unit of the DT, segregated by a Chinese Wall and ring-fenced from the SEBI regulated activities. This seems like a relaxation for the DTs, where permitted activities can be housed under one entity but only in different segments/ divisions, compared to the initial proposal of hiving off to a separate legal entity.
A timeline of 6 months from the date of notification (i.e by April 27, 2026) has been provided to transfer permitted activities to a separate business unit.
Another major restriction which Reg. 9C (1) provides, is a prohibition on RBI-regulated entities to undertake DT activities. DTs which are also RBI-regulated are mandated to carry out activities of DT through a separate business unit only.
Additionally, Reg. 9C(2) mandates DTs to ring-fence the net worth stipulated in DT Regs. (Reg. 7A) to ensure that it remains insulated from any adverse impact arising from undertaking other activities by DT.
SEBI Circular 1 lists out the conditions imposed on DTs to carry out activities not regulated by SEBI:
Standardisation of Debenture Trust Deed (‘DTD’) format
Key issue:
Extant regulatory framework viz. Reg 18 of NCS Regulations and Reg 14 of the DT Regulations do not provide for a standard format of DTD. Instead, the provisions indicate the mandatory contents of DTD as prescribed under section 71 of the CA, 2013 read with rule 8 of Companies (Share Capital and Debenture) Rules, 2014 and form SH-12. Due to this, DTDs were observed to have different contractual terms and their documentation varied from issuance to issuance. Hence, a standardised format was necessary for market optimisation, which is flexible enough to accommodate commercial understanding amongst the parties.
Proposal:
In light of the concerns discussed above, Industry Standards Forum – Debt (ISF Debt), proposed four model DTDs categorised as secured public issue, unsecured public issue, secured privately placed issue and unsecured privately placed issue. Model DTD in case of secured NCDs was provided in the CP (broadly divided into 4 parts- see fig 2 below).
Present Amendment:
While the model DTD is yet to be notified, SEBI has rolled out the enabling amendments in DT Regulations and NCS Regulations. As a result, the erstwhile requirement of having DTD in 2 parts viz. “Part A containing statutory/standard information pertaining to the debt issue; and Part B containing details specific to the particular debt issue” is done away with.
In case the issuer intends to deviate from the to be notified format of DTD, DTs may permit, subject to disclosure of a key summary sheet of deviations along with the rationale in the offer document of NCDs (GID/ KID/ shelf prospectus).
Utilisation of Recovery Expense Fund (‘REF’)
Key issue:
Reg. 11 of NCS Regulations mandates issuers of NCDs to create REF with the stock exchanges to enable the DT to take prompt action for enforcement/legal proceedings in case of ‘default’. The existing framework (Chapter IV of Master circular for Debenture Trustees) only lists out the illustrative expenses (legal expenses, cost for hosting meetings etc) and not the explicit list of eligible expenses. Since, DTs require prior consent of debenture holders to utilise REF funds, the absence of a clear expense list often leads to delays and difficulties in obtaining approvals and reimbursements.
Proposal:
SEBI proposed to provide an indicative list of eligible expenses for utilisation of REF (refer CP). Additionally, for eligible expenses, a mere intimation to the debenture holders would be sufficient to utilise REF. However, for other expenses, prior approval is still required. DTs will also be required to furnish a certificate from the auditor (format is yet to be notified) to the stock exchanges w.r.t eligible expenses to claim from REF.
Amendment & SEBI Circular 2:
Newly inserted Reg. 15A(3) in the DT Regs allows DTs to utilise REF in the manner specified by SEBI. Manner of utilisation and other conditions, as approved by SEBI above, have been notified by SEBI Circular 2, which has the effect of modifying Chapter IV of Master Circular for Debenture Trustees. .
As per the said circular, the following expenses can be reimbursed from REF without obtaining prior consent from debentureholders. However, DTs shall intimate debenture holders through mail and upload the details of reimbursement from REF on its website.
- Expenses related to enforcement/ legal proceedings
- Voting process
- Holding of meeting of debenture holders
- Filing court applications
- Legal fees
- Expenses for asset recovery services
- Appointment of legal consultants for enforcement/ legal proceedings
Any other expenditure may be claimed only with the prior consent of the debenture holders followed by intimation thereof to the designated stock exchange.
Further, in both the cases, the DT is required to submit an independent auditors’ certificate regarding the expenses incurred to the designated stock exchange for its verification. The amount shall be released from the REF only after verification of the said certificate.
Issuers to furnish information to DTs [Reg. 56 of LODR]
Key issue:
Certain compliance obligations are bestowed upon DTs with express timelines, for which DTs rely on the information provided by the issuers. However, corresponding responsibility, in respect of such compliances, has not been explicitly established for the issuers.
Proposal:
To specify the timeline for issuers to furnish information to the DT as per Reg. 56 of LODR Regulations to enable the DTs to keep a track of the status of compliances by the issuer and make necessary timely compliances as applicable to them.
Amendment and SEBI Circular 3:
Reg. 56 of the SEBI Listing Regulations is amended to provide a timeline of 24 hours from the occurrence of the event or information, within which issuers are required to furnish information to the DTs.
Additionally, SEBI circular 3 has provided for the timelines for submission of the following reports / certificates by the issuer to the DTs (note that para 1.2 of chapter VI of DT Master Circular has specified the timelines for similar reports / certificates to be furnished by DTs to the recognised stock exchange). The timelines are applicable from the quarter ended December 31, 2025.
- Security Cover certificate
Under the extant regulatory framework, DTs are required to monitor security cover maintained by the issuer in pursuance of regulation 15(1)(t) of the SEBI DT Regulations on a quarterly basis. Additionally, DTs are also required to obtain a certificate from the statutory auditor of the issuer on a half yearly basis and furnish the same to the stock exchange. Pursuant to para 1.2 of chapter IV of DT Master Circular, DTs are required to furnish the same to the stock exchange within 75/90 days from end of quarter
Similar obligations are imposed on issuer under the Listing Regulations, where issuer is required to furnish security cover certificate u/r 54 along with the submission of financial results within 45/60 days from end of quarter (as per Reg. 52) Issuer is required to furnish the security cover maintenance certificate provided by the statutory auditor and compliance with covenants to the DT on a half yearly basis along with submitting financial results u/r 52 to the DTs within 24 hours from occurrence of event/ receipt of information. [reg 56(1)(d) of Listing Regulations and para 5.5 of chapter III of DT Master Circular].
Vide this SEBI Circular 3, SEBI has prescribed the timeline of 60/75 days from end of quarter for furnishing security cover certificate to the DT for further submission to stock exchanges. While the idea of this circular was to impose corresponding obligations on the issuer to submit necessary documents to DT, the issuers were already under the obligation to provide a security cover certificate to DTs within the timelines prescribed in Reg. 54 & 56.
Evidently, Listing Regulations have a relatively stricter timeline on the issuers for furnishing the security cover certificate to the DT, which has to be complied with irrespective of the new timelines so prescribed.
- Other reports / certificates
| Reports/ Certificate | Periodicity/timeline specified for the issuer in SEBI Circular 3 | Periodicity/timeline specified for the DTs in the Master Circular |
|---|---|---|
| A statement of value of pledged securities | Quarterly basis 60 days – end of quarter 75 days – end of last quarter | Quarterly basis 75 days – end of quarter 90 days – end of last quarter [Para 1.2 of chapter VI of the DT Master Circular] |
| A statement of value for Debt Service Reserve Account or any other form of security offered | ||
| Net worth certificate of guarantor (in case debt securities are secured by way of personal guarantee) | Half yearly basis 60 days – end of each half-year | Half yearly basis 75 days – end of each half-year [para 1.2 of chapter VI of DT master circular] |
| Financials/value of guarantor prepared on basis of audited financial statement etc. of the guarantor (secured by way of corporate guarantee) | Annual basis 60 days – end of each financial year | Annual basis 75 days – end of each financial year |
| Valuation report and title search report for the immovable/ movable assets, as applicable. | Once in three years 60 days – end of the financial year | Once in three years 75 days – end of the financial year |
It is to be noted that till now, the issuers were not expressly mandated by law to furnish the reports / certificates mentioned in point B above to the DT, but were still providing the same as per the terms specified in DTD. The issuers are obligated to furnish the above certificates / reports within the aforestated timelines.
Conclusion
This amendment, though focused on EoDB, has placed an enhanced responsibility on the DTs and issuers to ensure timely compliance. DTs are now required to conduct non-SEBI regulated activities through separate business units while keeping their net worth protected from any adverse impact and segregating the records and resources from the SEBI-regulated activities. A relaxation is also provided for claiming eligible expenses from REF without prior approval of the debenture holders.
Another highlight of the amendment is the introduction of model DTD, requiring issuers to disclose any deviations with proper justification in the offer document. However, the same is yet to be notified.
Also, disclosures by issuers to DTs are now time bound where items u/r 56 of Listing Regulations are to be provided within fixed timelines of 24 hours and other reports/ statements within defined timelines & periodicity.
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