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SEBI notifies amendments in LODR for NCS entities Scheme of Arrangement | Submission of financial results & line items | Transfer to IPEF for unclaimed NCS amounts by body corporate

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Ajay Ramanathan, Executive |

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  1. SEBI LODR amendments: Minority say in independent directors, added regulations for debt issuersSEBI rationalizes ID appointment and removal process for first term Re-appointment process to be rationalized post amendment in CA, 2013
  2. SEBI rationalizes ID appointment and removal process for first term Re-appointment process to be rationalized post amendment in CA, 2013

SEBI LODR amendments: Minority say in independent directors, added regulations for debt issuers

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Pammy Jaiswal | Partner | Vinod Kothari and Company (pammy@vinodkothari.com)

Background

Following the various recommendations provided by the Primary market Advisory Committee (PMAC), SEBI in its board meeting held on 30th September, 2022 discussed several proposals including the agenda to review the process for independent directors’ (IDs) appointment, re-appointment or removal,  introducing the need to appoint a monitoring agency for overseeing the utilisation of the issues proceeds from the preferential issue and the qualified institutional placements (‘QIP’), requirement of obtaining NoC from SEBI for schemes of arrangement involving such companies which have listed their Non-Convertible Securities (‘NCS’) and several other changes dealing with disclosures and financial results for NCS listed entities. Our snippet covering the aforesaid board decisions may be viewed here.

These proposals have been notified, as the SEBI Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2022 (LODR 6th Amendment Regulations) have come into effect vide Notification dated 14th November, 2022 (‘Effective Date’). Our snippet covering the amendments may be viewed here.

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SEBI rationalizes ID appointment and removal process for first term Re-appointment process to be rationalized post amendment in CA, 2013

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– Kaushal Shah, Executive | kaushal@vinodkothari.com

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Read our related resources :

  1. SEBI LODR amendments: Minority say in independent directors, added regulations for debt issuers
  2. SEBI notifies amendments in LODR for NCS entities Scheme of Arrangement | Submission of financial results & line items | Transfer to IPEF for unclaimed NCS amounts by body corporate

Workshop on Structured Digital Database for Insider Trading: Preparing for the Compliance Certificate

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In view of the overwhelming response received on our earlier session on the topic held on 9th November, 2022, we are announcing a repeat session on 15th November, 2022

Click here to register for the workshop – https://forms.gle/JgWXqp2JJUBX4wPm8
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SEBI further caps limit for ISINs to reduce fragmentation and boost liquidity

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– Lovish Jain, Executive | lovish@vinodkothari.com

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BSE & NSE simplify the compliance certificate format for Structured Digital Database (SDD), allows PCS certification

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– Kaushal Shah, Executive | Kaushal@vinodkothari.com

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Prohibition of Insider Trading – Resource Centre

SEBI rationalizes issuances on Electronic Book Platform – Limits | Bidding Process | Anchor Investor | Basis of Allotment

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– Kaushal Shah, Executive & Lovish Jain, Executive | corplaw@vinodkothari.com

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FAQs on preferential issue of equity shares and convertible securities under SEBI ICDR

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Anushka Vohra, Manager | corplaw@vinodkothari.com

Table of Contents
Governing provisionsAllotment
Issuer and Allottee – eligibilityBoard’s approval
Conditions precedentShareholders’ approval
Relevant Date for determining the priceIn-principle approval
PricingListing approval
Lock-in requirementAnnexure-I
Consideration
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Maintenance of security cover for secured debt made transparent by SEBI

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Debenture trustees responsible for monitoring the security cover and covenants effective October 1, 2022

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

Background

Securities and Exchange Board of India (‘SEBI’) is carrying out radical changes in relation to monitoring the security cover and covenants with respect to listed debt securities. Recently, SEBI amended SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) and SEBI (Debenture Trustees) Regulations, 1993 (‘DT Regulations’) and SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (‘NCS Regulations’) in order to substitute the concept of ‘asset cover’ with ‘security cover’ and accordingly, prescribed the requirement of maintenance and reporting of the security cover in case of listed secured debentures[1].

Monitoring of security cover has always been the key responsibility of the DT and therefore, SEBI in November 2020, had prescribed norms for independent due diligence by DTs for the purpose of creation of security[2] and for periodical monitoring of the security created and enhanced disclosures by DTs[3]. Thereafter, in August, 2021[4] SEBI rolled out the norms for security and covenant monitoring using Distributed Ledger Technology (‘DLT’) and in March, 2022 prescribed operational guidelines for security and covenant monitoring wherein system generated unique identifier (Asset ID) will be generated for each security offered by issuer in order to enable the DTs and Credit Rating Agencies (‘CRAs’) for better tracking[5]. Lastly, on August 4, 2022[6] SEBI issued enhanced guidelines for DTs and listed issuer companies on security creation and initial due diligence which inter-alia provides directions to harmonize the process of creation of security.

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Debentureholders’ rights in Intercreditor agreements

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Supreme Court lays principles in case of debenture defaults

– Sikha Bansal, Partner, Vinod Kothari & Company | corplaw@vinodkothari.com

A well-developed corporate bond market not only provides cost-effective funds to the issuer, but also enables lenders like banks and other financial institutions to streamline their asset-liability mismatches. As such, there have been a lot of efforts to facilitate the development of the corporate bond market in India. While the market is growing steadily, the size of the market remains small as compared to other emerging markets in Asia[1]. Therefore, India may still have a long way to go.

An important element in ensuring smooth functioning of the bond market is to ensure that there is sufficient clarity on the options, remedies, and rights which the debentureholders have or may have in a given scenario. One such aspect has been dealt with by the Supreme Court (SC) in the recent ruling Securities and Exchange Board of India v. Rajkumar Nagpal and Others[2] (‘SC ruling’). The SC was dealing with the interplay between the RBI’s ‘Prudential Framework for Resolution of Stressed Assets’ issued in June, 2019 (‘RBI Resolution Framework’) and SEBI’s Circular on ‘Standardisation of procedure to be followed by Debenture Trustees in case of ‘Default’ by Issuers of listed debt securities’ (‘SEBI Circular’) and consequent impact of the same on the rights of the debentureholders.

As we see below, the SC ruling is crucial – that it clears the air around the force which SEBI Circular carries and protects dissenting investors from non-statutory compromises. However, most importantly, this SC ruling can be seen as highlighting the problems and gaps which may arise because of segregated rule-making where two regulators were bound by their respective regulatory ambit, thereby leading to a not-so-comprehensive resolution framework.

The author, in this article, has not gone into the facts of the particular case (which, inter alia, necessitated the SC to invoke Article 142 of the Constitution). Instead, the author has deliberated on the key takeaways from the SC ruling.

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