The Companies Act, 1956 had provisions regarding the consolidation and re issuance of debt securities under section 121.This section gave the company power to keep the same security alive for the purpose of re-issue after it’s been redeemed. This helped the company to increase liquidity in the secondary debt market. However Companies Act, 2013 was silent on this matter.
Thus to clarify on this subject SEBI issued a concept paper on 04 December, 2014 proposing amendment in SEBI (Issue and Listing of Debt Securities) Regulations, 2008 to this effect.
The concept paper was followed by a consultation paper issued on 2nd February, 2017 to seek comments regarding the consolidation and re-issuance of debt securities. The consultation paper provided an in detail analysis of the corporate bond market and also spoke about the remarkable growth of the primary debt market and the relatively slower growth of the secondary debt market.
Therefore, with an objective to further facilitate the debt market it considered and approved proposals regarding the consolidation and re-issuance of debt securities during its board meeting on 26th April, 2017
The SEBI’s board in its meeting approved the following:-
This is a step in the right direction and has been welcomed with open arms as these measures will help boost liquidity in the debt/ bond market
(Author is associated with Vinod Kothari & Company and can be reached at email@example.com)