Amendments to SEBI (NCS) Regulations

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Jun 30, 2022

Amendments to SEBI (NCS) Regulations

The Securities and Exchange Board of India (‘SEBI’) has amended the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (‘SEBI (NCS) Regulations’) by way of its Notification dated April 11, 2022. The key amendments are set out below:

i. Amendment to Regulations 23 and 38 of SEBI (NCS) Regulations

As per the amended Regulation 23(5), every issuer must ensure that the secured debt securities are secured by a 100% or higher security cover which will be sufficient to discharge the principal amount and the interest thereon at all times.

The amended Regulation 38(2) now imposes a similar obligation on the lead manager, as the one set out above.

ii. Amendment to Regulation 40 of SEBI (NCS) Regulations

The amended Regulation 40 now prescribes separate formats of due diligence certificate for secured and unsecured debt securities. Such due diligence certificate must be furnished by the debenture trustee to SEBI and stock exchange(s) at the time of filing the draft offer document with the stock exchange(s) and prior to opening of the public issue of the debt securities.

iii. Amendment to Regulation 43 of SEBI (NCS) Regulations

As per the amended Regulation 43(2), the offer document and the debenture trust deed must contain details of the charge created in respect of the secured debt securities, along with an undertaking that the assets on which the charge or security has been created in order to meet the 100% or higher security cover are free from any encumbrances. In case the assets are encumbered, a consent to create any further charge on the assets should be obtained from the existing creditors, prior to creation of the charge.

The proviso to the old sub-clause, which clarified that the sub-clause will not apply if the charge is created on additional assets other than the assets comprising of 100% security cover has now been deleted.

iv. Amendment to Schedule I of SEBI (NCS) Regulations

As per the amended Schedule I, the offer letter must contain details of credit rating, along with the latest press release of the credit rating agency in relation to the issue. The offer letter must also contain a declaration that the rating is valid as on the date of issuance and listing. Such press release must not be older than one year from the date of opening of the issue.

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