Securities and Exchange Board of India
THE GAZETTE OF INDIA
EXTRAORDINARY
PART –II – SECTION 3 – SUB SECTION (ii)
PUBLISHED BY AUTHORITY
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 4th July, 2003
SECURITIES AND EXCHANGE BOARD OF INDIA
(DEBENTURE TRUSTEES) (AMENDMENT) REGULATIONS, 2003
S.O. No. 763(E). In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to amend the Securities and Exchange Board of India (Debenture Trustees ) Regulations, 1993, namely:-
1. (i) These regulations may be called the Securities and Exchange Board of India (Debenture Trustees) (Amendment) Regulations, 2003.
(ii) They shall come into force on the date of their publication in the Official Gazette.
2. In the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1 993(hereinafter referred to as ‘the said Regulations’): –
(i) in regulation 2 of the said Regulations, after clause (e) the following shall be inserted, namely –
“(ee) “net worth” means aggregate of value of the paid up equity capital and free reserves (excluding reserves created out of revaluation) reduced by the aggregate value of accumulated losses and deferred expenditure not written off (including miscellaneous expenses not written off) as per the latest audited balance sheet.”
(ii) after regulation 2 of the said Regulations, the following shall be inserted, namely –
“Power of the Board to issue clarifications-
2A. In order to remove any difficulties in respect of the application or interpretation of these regulations, the Board may issue clarifications or guidelines in the form of circulars.”
(iii) in regulation 6 of the said Regulations,
(a) for clause (d) the following shall be substituted, namely –
“(d) has in his employment at least one person who possesses the professional qualification in law from an institution recognised by the Government.”
(b) after clause (f) the following shall be inserted, namely –
“(g) fulfills the capital adequacy requirements specified in regulation 7A”
(iv) after regulation 7 of the said Regulations, the following regulation shall be inserted, namely –
“Capital Adequacy Requirement.
7A. The capital adequacy requirement referred to in clause (g) of regulation 6 shall not be less than the net worth of one crore rupees. Provided that a debenture trustee holding certificate of registration as on the date of commencement of the Securities and Exchange Board of India (Debenture Trustees) (Amendment) Regulations, 2003 shall fulfill the net worth requirements within two years from the date of such commencement.”
(v) for regulation 1 3A of the said Regulations, the following regulation shall be substituted, namely –
“13A. No debenture trustee shall act as such for any issue of debentures in case-
(a)it is an associate of the body corporate or
(b) it has lent and the loan is not yet fully repaid or is proposing to lend money to the body corporate.
Provided that this requirement shall not be applicable in respect of debentures issued prior to the commencement of the Companies (Amendment) Act, 2000, where-
(i) recovery proceedings in respect of the assets charged against security has been initiated, or
(ii) the body corporate has been referred to Board for Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985, prior to commencement of the Securities and Exchange Board of India (Debenture Trustees) (Amendment) Regulations, 2003.”
(vi) in Regulation 15 of the said Regulations,
(a) in sub-regulation (1),
(i) clause (b) shall be omitted.
(ii) in clause (g), for the word “ensure” the words “ascertain and satisfy itself” shall be substituted.
(iii) for clause (h) the following shall be substituted, namely :-
“(h) ensure on a continuous basis that the property charged to the debentures is available and adequate at all times to discharge the interest and principal amount payable in respect of the debentures and that such property is free from any other encumbrances save and except those which are specifically agreed to by the debenture trustee.”
(b) after sub-regulation (2) the following shall be inserted, namely –
“(3) No debenture trustee shall relinquish its assignments as debenture trustee in respect of the debenture issue of any body corporate, unless and until another debenture trustee is appointed in its place by the body corporate.
(4) A debenture trustee shall maintain the net worth requirements as specified in these regulations on a continuous basis and shall inform the Board immediately in respect of any shortfall in the net worth and in such a case it shall not be entitled to undertake new assignments until it restores the net worth to the level of specified requirement within the time specified by the Board.
(5) A debenture trustee may inspect books of accounts, records, registers of the body corporate and the trust property to the extent necessary for discharging its obligations.”
(vii) in regulation 1 7A of the said Regulations, after sub regulation (2) the following shall be inserted, namely –
“(3) The compliance officer shall report any non-compliance, of the requirements specified in the listing agreement with respect to debenture issues and debenture holders, by the body corporate to the Board.”
(viii) for the Schedule IV of the said Regulations the following shall be substituted , namely–
“SCHEDULE IV
Securities and Exchange Board of India (Debenture Trustees)
Regulations, 1993
[Regulation 14]
CONTENTS OF TRUST DEED
Every debenture trustee shall ensure that the trust deed executed between a body corporate and debenture trustee shall amongst other things provide for the following matters namely: –
This section shall inter-alia state the rights of the debenture holders and the manner in which these rights are vested in the trustee.
2. Description of instruments
This section shall inter-alia state the purpose of raising finance through debenture issue description of debentures as regards amount, tenure, interest/coupon rate, periodicity of payment, period for redemption, options available, terms of conversion/redemption of the debentures in terms of the issue to the debenture holders, debt equity ratio and debt service coverage ratio, if applicable;
3. Details of Charged Securities ( Existing or future)
This section shall inter-alia state the details regarding the following :
i. Nature of charge, examination of title
ii. Rank of charge of assets viz. First , second, pari passu, residual etc
iii. Charging of future assets.
iv. Time limit within which the future security for the issue of debentures shall be created as specified in SEBI (Disclosure and Investor Protection) Guidelines, 2000.
v. Enforceability of securities, events under which security becomes enforceable
vi. Obligation of company not to create further charge or encumbrance of the trust property without prior approval of the trustee.
vii. Minimum security cover required.
viii. Provision for subsequent valuation.
ix. Circumstances when the security will become enforceable.
x. Method and mode of preservation of assets charged as security for debenture holders.
xi. Circumstances specifying when the security may be disposed off or leased out with the approval of trustees.
xii. Procedure for allowing inspection of charged assets, book of accounts, by debenture trustee or any person or persons authorised by it;
4. Events of defaults
This section shall clearly define the event of default which if occurs shall invite the actions by debenture trustee. This section shall also contain the steps which shall be taken by debenture trustee in the event of defaults.
5. Rights of debenture trustees
This section shall inter-alia provide that :
i Debenture Trustee is entitled to inspect the registers of the company and to take copies and extracts thereof;
ii. Debenture Trustee has a right to appoint a nominee director.
6. Obligations of body corporates
This section shall inter-alia state the following with respect to company’s duties :
1. to maintain Register of debenture holders with addresses with record of subsequent transfers and changes of ownership
2. to keep proper books of accounts open for inspection by debenture trustee
