SEBI has, by way of a Notification dated October 8, 2020, made the following key amendments to the SEBI (Issue and Listing of Debt Securities) Regulations, 2008:

i.      Matters to be included in the debenture trust deed with respect to debt securities are now aligned with the matters to be included in a debenture trust deed under the Companies Act and the deed will be bifurcated into two parts – Part A containing statutory/standard information pertaining to the debt issue and Part B containing details specific to the particular debt issue;

ii.     The issuer of debt securities is required to give an undertaking in the information memorandum / disclosure document that the assets on which charge is created are free from any encumbrances or where the assets are already charged, the permission or consent to create a second or pari passu charge on the assets of the issuer has been obtained from the earlier creditor;

iii.   The issuer will be required to create a recovery expense fund (‘REF’), to enable debenture trustees (‘DTs’) to take prompt action for enforcement of security in case of defaults with respect to listed debt securities. SEBI has issued a Circular on October 22, 2020, requiring such issuers to deposit an amount equal to 0.01% of the issue size (capped at Rs 25,00,000 (approx. US$ 34,000)) in cash or cash equivalents, including bank guarantees (subject to certain conditions) with the designated stock exchange. In case of a default, the DT is required, after obtaining consent from the holders of the debt securities for enforcement of security, to call upon the designated stock exchange to release the REF to the DT. The Circular became effective from January 1, 2021 and applies to applications for listing of debt securities made on or after January 1, 2021. Existing issuers with listed debt securities will be provided an additional time period of 90 days to create a REF; and

iv.    Additional disclosures in the disclosure documents / information memorandum have been prescribed.

SEBI has issued Guidelines dated November 3, 2020 to give effect to the aforesaid amendments and certain amendments dated October 8, 2020 to the SEBI (Debenture Trustees) Regulations, 1993, which were introduced to secure the interest of investors in listed debt securities and to enable DTs to perform their duties effectively (‘Guidelines’). These Guidelines inter alia require the issuer of listed debt securities to provide specified documents (such as details and underlying documentation with respect to the assets on which a charge is proposed to be created) to the DT at the time of execution of the debenture trustee agreement to enable the DT to exercise due diligence with respect to the creation of security.