Obligations of Listed Entity which has Listed its Non-Convertible Debt Securities & Non-Convertible Redeemable Preference Shares

Analysis of Chapter V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) explains Obligations Of Listed Entity Which Has Listed Its Non-Convertible Debt Securities Or Non-Convertible Redeemable Preference Shares Or Both vide Regulation 49 to 62.

Obligations of Listed Entity which has Listed its Non-Convertible Debt Securities & Non-Convertible Redeemable Preference Shares

Securities and Exchange Board of India (‘SEBI’) in terms of power conferred under SEBI Act, 1992 notified Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations 2015’) on 2nd September, 2015, whereby it tries to align the present Listing Agreement with the Companies Act, 2013 and they consolidate the scattered requirement under listing agreement for different securities under single piece of regulation. This regulation will be effective from the 90th day of this notification in the Official Gazette i.e. 1st day of December, 2015. The Regulation 23(4) and 31A will be effective with immediate effect.

Date of Publication in Official Gazette: September 2, 2015

Date of Applicability: December 1, 2015

Applicability: The provisions of below given regulations apply only to a listed entity which has listed its ‘Non-convertible Debt Securities’ and ‘[1]Non-Convertible Redeemable Preference Shares’ on a [2]recognized stock exchange.

This regulation also applicable on “Perpetual Debt Instrument” and “Perpetual Non-Cumulative Preference Share” listed by banks.

‘NON – CONVERTIBLE DEBT SECURITIES’ which is ‘debt securities’ as defined under regulation 2(1)(e) of the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008. [Regulation 2(1)(t) of SEBI (LODR) Regulation 2015]

“NON – CONVERTIBLE REDEEMABLE PREFERENCE SHARE” means a preference share which is redeemable in accordance with the provisions of the Companies Act, 1956 (or the Companies Act, 2013) and does not include a preference share which is convertible into or exchangeable with equity shares of the issuer at a later date, with or without the option of the holder. [Regulation 2(1)(k) of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations 2013]

“DEBT SECURITIES” [Regulation 2(1) (e) of SEBI (ILDS) Regulations 2008] means a non-convertible debt securities which create or acknowledge (include)

Debt Security does not include:

Bonds issued by Government or such other bodies as may be specified by the Board, security receipts and securitized debt instruments

All the terms “Indebtedness”, “Bond”, “Debenture”, “Security”, “Perpetual Debt Instrument” and “BANK” define at the end of the article.

Lets Discuss the Regulation

Regulation- 50. INTIMATION TO STOCK EXCHANGE(S):

I. INTEREST Due/ Redemption Due:

The listed entity shall give prior intimation to the stock exchange(s)

Interest Due: At least (11) eleven [3]working days before the date on and from which the interest on debentures and bonds shall be payable.

Redemption Due: At least (11) eleven working days before the date on and from which the redemption amount of redeemable shares or of debentures and bonds shall be payable.

II. Intention to RAISE FUNDS:

The listed entity [4]may give intimation to raise funds to the stock exchange(s) prior to the meeting of board of directors wherein the proposal to raise funds through new non convertible debt securities or non-convertible redeemable preference shares shall be considered.

The listed entity shall give intimation to raise funds to the stock exchange(s) prior to issuance of such securities.

The aforesaid issue may be either through a public issue or on private placement basis.

III. Intention to Issue Non Convertible Debt Security:

The listed entity shall intimate to the stock exchange(s), at least (2) two working days before the meeting of its board of directors, at which the recommendation or declaration of below given matter is proposed to be considered;

• issue of non convertible debt securities, or
• any other matter affecting the rights or
• interests of holders of non convertible debt securities or
• non convertible redeemable preference shares

Two Working Days: excluding the date of the intimation and date of the meeting.

Regulation- 51. DISCLOSURE OF INFORMATION’S:

The listed entity shall promptly inform the stock exchange(s) of all information having:

• Bearing on the performance/Operation of the listed entity
• Price Sensitive Information OR
• Any action that shall affect payment of interest or dividend of Non-Convertible Preference Shares OR
• Redemption of Non Convertible Debt Securities OR
• Redeemable Preference Shares

Prompt Inform:

• The expression ‘promptly inform’, shall imply that the stock exchange must be informed as soon as practically possible and without any delay AND
• That the information shall be given first to the stock exchange(s) before providing the same to any third party.

The listed entity that has issued or is issuing non convertible debt securities and/or non-convertible redeemable preference shares shall make disclosures as specified in [5]Part B of Schedule III.

Regulation- 52. FINANCIAL RESULT:

Provision relating to financial result:

The listed entity shall PREPARE and SUBMIT UN-AUDITED or AUDITED financial results on a half yearly basis in the format as specified by the Board within forty five days from the end of the half year to the recognized stock exchange.

Financial Result on a HALF YEARLY basis, in the specified Format, WITHIN 45 days from the end of the half year to the recognized stock exchanged.

Requirement with Respect to Financial Result:

The listed entity shall comply with following requirements with respect to Preparation, Approval, Authentication and Publication of annual and half-yearly financial results:

Limited Review Report:

• Un-audited financial results shall be accompanied by limited review report prepared by the STATUTORY AUDITORS of the Listed Entity or
• In case of Public Sector Undertakings, Un-audited financial results shall be accompanied by limited review report prepared by any PRACTICING CHARTERED ACCOUNTANT, in the format as specified by the Board:

Note:

No need to file un-audited financial results for the last half year accompanied by limited review report by the auditors, IF Company intimates in advance to the stock exchange(s) that it shall submit to the stock exchange(s) its annual audited results within Sixty Days from the end of the financial year.

Signing of Financial Result:

1. Half-yearly results shall be taken on record by the board of directors AND
2. Signed by the managing director / [6]executive director.

Format of Financial Result:

The audited results for the year shall be submitted to the recognized stock exchange(s) in the same format as is applicable for half-yearly financial results

Time period of filing of audited Financial Result:

If the listed entity opts to submit un-audited financial results for the last half year accompanied by limited review report by the auditors, it shall also submit audited financial results for the entire financial year, as soon as they are approved by the board of directors.

Disclosure of Modified Opinion:

Modified opinion(s) in audit reports shall be appropriately and adequately addressed by the board of directors while publishing the accounts for the said period. Modified opinion that have a bearing on the

• Interest Payment/ Dividend Payment pertaining to non-convertible redeemable debentures/ redemption or
• Principal repayment capacity of the listed entity

Requirement with Respect to submission of Audited Financial Results:

I. The annual audited financial results shall be submitted along with the following documents:

• The annual audit report; and
• Either Form A for audit report with unmodified opinion, or Form B for audit report with modified opinion

II. Duty of Board: The Form B and the accompanying annual audit report submitted in terms of clause (a)

• Shall be reviewed by the stock exchange(s) and
• the Qualified Audit Report Review Committee in the manner specified in Schedule VIII.

III. Duty of Listed entity: The listed entity shall on the direction issued by the Board,

• Carry out the necessary steps, for rectification of modified opinion and/or
• submission of revised pro-forma financial results, in the manner specified in Schedule VIII.

IV. Format of application: The applicable formats of Form A and Form B shall be specified by the Board from time to time.

[7]The listed entity, while submitting half yearly / annual financial results, shall disclose the following line items along with the financial results:

(a) credit rating and change in credit rating (if any);

(b) asset cover available, in case of non convertible debt securities;

(c) debt-equity ratio;

(d) previous due date for the payment of interest/ dividend for non-convertible redeemable preference shares/ repayment of principal of non-convertible preference shares /non convertible debt securities and whether the same has been paid or not; and,

(e) next due date for the payment of interest/ dividend of non-convertible preference shares /principal along with the amount of interest/ dividend of non-convertible preference shares payable and the redemption amount;

(f) debt service coverage ratio;

(g) interest service coverage ratio;

(h) outstanding redeemable preference shares (quantity and value);

(i) capital redemption reserve/debenture redemption reserve;

(j) net worth;

(k) net profit after tax;

(l) earnings per share:

Certain Non- Applicability’s:

• The requirement of disclosures of debt service coverage ratio, asset cover and interest service coverage ratio shall not be applicable for banks or non banking financial companies registered with the Reserve Bank of India

• The requirement of this sub- regulation shall not be applicable in case of unsecured debt instruments issued by regulated financial sector entities eligible for meeting capital requirements as specified by respective regulators.

Certificate from Debenture Trustee:

While submitting the information required under sub- regulation (4), the listed entity shall submit to stock exchange(s), a certificate signed by debenture trustee that it has taken note of the contents.

Disclosure of the Material deviation:

• If there is any material deviation “in the use of proceeds of issue of
  • Non convertible debt securities and
  • non-convertible redeemable preference shares from the objects stated in the offer document”.
• Time period of submission: This statement shall be submitted on half yearly basis along with the half yearly financial results.

Publication in News Paper:

• Time period of publication: Within (2) two calendar days of the conclusion of the meeting of the board of Directors.
• Matter to be published: the financial results and statement referred to in sub-regulation (4).
• News Paper: Publish in daily English news paper circulating in the whole or substantially the whole of India.

Separate Disclosures for entity which has listed its NON CONVERTIBLE REDEEMABLE PREFERENCE SHARES:

(a) Profit for the half year and cumulative profit for the year;

(b) Free reserve as on the end of half year;

(c) Securities Premium Account balances (if redemption of redeemable preference share is to be done at a premium, such premium may be appropriated from securities premium account):

Condition: Disclosure on securities premium account balance may be provided only in the year in which non convertible redeemable preference shares are due for redemption;

(d) Track record of dividend payment on non convertible redeemable preference shares:

Condition: In case the dividend has been deferred at any time, then the actual date of payment shall be disclosed.

(e) Breach of any covenants under the terms of the non convertible redeemable preference shares:

Condition: In case a listed entity is planning a fresh issuance of shares whose end use is servicing of the non convertible redeemable preference shares (whether dividend or principle redemption), then the same shall be disclosed whenever the listed entity decided on such issuances.

Regulation- 53 . ANNUAL REPORT:

Disclosure in Annual Report:

The annual report of the listed entity shall contain disclosures as specified in Companies Act, 2013 along with the following:

i. Audited Financial Statements i.e. balance sheets, profit and loss accounts etc;

ii. Cash Flow Statement[8]

iii. Auditors Report;

iv. Directors Report;

v. Name of the Debenture Trustees with full contact details ;

vi. Related Party Disclosures as specified in Para A of Schedule V.

Regulation- 54. ASSET COVER:

a) The listed entity shall maintain 100% (Hundred Percent) asset cover, which is sufficient to discharge the principal amount at all times for the non-convertible debt securities issued.

b) The listed entity shall disclose to the SE (Stock Exchange) as applicable, the extent and nature of security created and maintained with respect to its secured listed non-convertible debt securities.

The listed entity shall disclose half-yearly, year-to-date and annual financial statements as applicable.

Not Applicability of this regulation:

In case of unsecured debt securities issued by regulated financial sector entities eligible for meeting capital requirements as specified by respective regulators

Regulation- 55 REVIEW OF CREDIT RATING:

Each rating obtained by the listed entity with respect to non-convertible debt securities shall be Reviewed At Least Once a Year by a credit rating agency registered by the Board

INTIMATION TO DEBENTURE TRUSTEE/ STOCK EXCHANGE AND HOLDER OF SECURITY

Regulation- 56. DOCUMENTS AND INTIMATION TO DEBENTURE TRUSTEE:

A. The listed entity shall forward the following to the debenture trustee promptly:

ANNUAL REPORT:

i. A copy of the annual report

ii. A copy of certificate from the listed entity’s auditors in respect of utilization of funds during the implementation period of the project for which the funds have been raised

Time Period: Same shall forward at the same time as it is issued along with a copy.

Condition: If issued for financial working capital

In the case of debentures or preference shares issued for financing working capital or general corporate purposes or for capital raising purposes the copy of the auditor’s certificate may be submitted at the end of each financial year till the funds have been fully utilized or the purpose for which these funds were intended has been achieved.

NOTICES, RESOLUTIONS AND CIRCULARS:

A copy of all notices, resolutions and circulars relating to-

i. A Copy of Resolution and Circular of New Issue of non convertible debt securities;

ii. A copy of Notice of the meetings of holders of non-convertible debt securities;

Time Period: At the same time as they are sent to shareholders/ holders of non convertible debt securities OR advertised in the media including those relating to proceedings of the meetings;

INTIMATIONS REGARDING:

i. Any revision in the rating;

ii. Any default in timely payment of interest or redemption or both in respect of the non convertible debt securities

iii. Failure to create charge on the assets

CERTIFICATE REGARDING ASSET COVER:

• A Certificate regarding maintenance of 100% (hundred percent) asset cover in respect of listed non convertible debt securities.
• Certificate along with half yearly Financial Result.
• This is half yearly Certificate
• Certificate by a Practicing Company Secretary of a Practicing Chartered Accountant

Non Applicability of this half yearly certificate:

The submission of such half yearly certificates is not applicable in cases where a listed entity is a bank or non banking financial companies registered with Reserve Bank of India or where bonds are secured by a Government guarantee.

B. Information required by Debenture Trustee:

The listed entity shall forward to the debenture trustee any such information sought and provide access to relevant books of accounts as required by the debenture trustee.

Form of Submission (Physically/ Electronically):

The listed entity may, subject to the consent of the debenture trustee, send the information stipulated in sub-regulation (1), in electronic form/fax.

Regulation-57 SUBMISSIONS WITH STOCK EXCHANGE:

i. Certificate Regarding Payment Of Interest And Principal:

• Submission within 2 days of the interest or principal or both becoming due.
• Certificate regarding that entity has made timely payment of interests or principal obligations or both in respect of the non convertible debt securities

ii. Undertaking on Annual Basis:

• The listed entity shall provide an undertaking to the stock exchange(s) on annual basis.
• Undertaking regarding all documents and intimations required to be submitted to Debenture Trustees in terms of Trust Deed and Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 have been complied with.

iii. Information required by SEBI:

The listed entity shall forward to the stock exchange any other information in the manner and format as specified by the Board from time to time

Regulation- 58. SUBMISSIONS WITH HOLDER OF SECURITY:

i. The listed entity shall send following documents to holder of non convertible preference share:

• Soft copies of full annual reports with holder of non convertible preference share, have registered their email address(es) for the purpose;
• Hard copy of statement containing the salient features of all the documents, as specified to holders, who have not so registered
  • Financial Statement, (if applicable, consolidated financial statement)
  • Auditor Report
  • Directors’ Report

ii. The listed entity shall send following documents to both non convertible debt securities holder of non convertible preference share:

• Hard copy of full annual report to those holders, who request for the same.
• Half yearly communication as specified in sub-regulation (4) and (5) of regulation 52, to holders of non convertible debt securities and non convertible preference shares.

iii. The listed entity shall send the notice of all the meetings of holders of non convertible debt securities and holders of non-convertible redeemable preference shares respectively.

The notice must mentioned the provision or appointment of proxy as mentioned (as per Section 105 of the Companies Act, 2013) shall be applicable for such meeting

iv. Proxy form. which shall be worded in such a manner that holders of these securities may vote either for or against each resolution.

Regulation 60- RECORD DATE:

Purposes for Record Date:

The listed entity shall fix a record date for purposes of payment of interest, dividend and payment of redemption or repayment amount or for such other purposes as specified by the stock exchange.

Time period of Intimation to Stock Exchange:

At least 7 (seven) [9]working days in advance to the recognised stock exchange(s) of the record date or of as many days as the stock exchange(s) may agree to or require specifying the purpose of the record date

Regulation- 61. TERMS OF NON CONVERTIBLE DEBT SECURITIES AND NON CONVERTIBLE REDEEMABLE PREFERENCE SHARES:

a) The listed entity shall ensure timely payment of interest or dividend of non-convertible redeemable preference shares or redemption payment.

Situation of non declaration of Dividend:

If listed entity has defaulted in payment of interest on debt securities or redemption thereof or in creation of security as per the terms of the issue of debt securities. Then listed entity shall not declare or distribute any dividend.

Non Applicability of this clause:

This requirement shall not be applicable in case of unsecured debt securities issued by regulated financial sector entities eligible for meeting capital requirements as specified by respective regulators.

b) Unclaimed Interest/ Dividend:

The listed entity shall not forfeit unclaimed interest/dividend and such unclaimed interest/dividend shall be transferred to the ‘Investor Education and Protection Fund’ set up as per Section [10]125 of the Companies Act, 2013.

c) Redemption of Listed Securities:

The listed entity shall not select any of its listed securities for redemption otherwise than pro rata basis or by lot, unless the terms of issue provide otherwise.

d) Transfer of Securities:

For Transfer of shares the listed entity shall comply with following requirements:

• Regulation [11]40 ; and
• Schedule VII -w transfer of securities

vii. 62. WEBSITE.

(1) The listed entity shall maintain a functional website containing the following information about the listed entity:-

(a) details of its business;

(b) financial information including complete copy of the annual report including balance sheet, profit and loss account, directors report etc;

(c) contact information of the designated officials of the listed entity who are responsible for assisting and handling investor grievances;

(d) email address for grievance redressal and other relevant details;

(e) name of the debenture trustees with full contact details;

(f) the information, report, notices, call letters, circulars, proceedings, etc concerning non-convertible redeemable preference shares or non convertible debt securities;

(g) all information and reports including compliance reports filed by the listed entity;

(h) information with respect to the following events:

(i) default by issuer to pay interest on or redemption amount;

(ii) failure to create a charge on the assets;

(iii) revision of rating assigned to the non convertible debt securities:

(2) The listed entity may also issue a press release with respect to the events specified in sub-regulation (1).

(3) The listed entity shall ensure that the contents of the website are correct and updated at any given point of time.

Other Obligations

As above we have discussed the regulations specifically applicable to listed entity which has listed its non-convertible debt securities or non-convertible redeemable preference shares or both.

But there are certain other regulations which are also applicable on listed entity, which have its non-convertible debt securities or non-convertible redeemable preference shares or both listed on recognized stock exchange as given below:

Regulation No. 5-14

Common obligations of listed entities

• Debt securities include debentures and bonds. Bond issued by government companies and statutory bodies also included in the definition but sovereign bonds issued by government are not included.

Indebtedness:

The word indebtedness made form word in•debt•ed•ness. An obligation to pay money to another party.

Bond:

A bond is a debt security. When you purchase a bond, you are lending money to a government, municipality, corporation or other entity known as an issuer.* In return for that money, the issuer provides you with a bond in which it promises to pay a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it matures, or comes due.

Bonds are used by companies, municipalities and states to raise money and finance a variety of projects and activities. Owners of bonds are debt holders, or creditors, of the issuer. All documented contracts and loan agreements are bonds.

Debenture:

A debenture is an instrument of debt executed by the company acknowledging its obligation to repay the sum at a specified rate and also carrying an interest. It is only one of the methods of raising the loan capital of the company. A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company’s capital structure, it does not become share capital.

The debentures issued under the Act shall not carry any voting rights. In the case of public issue of debentures, there would be a large number of debenture holders on the register of the company. As such it shall not be feasible to create charge in favour of each of the debenture holder. A common methodology generally adopted is to create Trust Deed conveying the property of the company. A Trust deed is an arrangement enabling the property to be held by a person or persons for the benefit of some other person known as beneficiary. The Trustees declare the Trust in favour of the debenture holders. The Trust Deed may grant the Trustees fixed charge over the freehold and leasehold property while a floating charge may be created over other assets. The Company shall allow inspection of the Trust Deed and also provide copy of the same to any member or debenture holder of the company on payment of such sum as may be prescribed.

Security:

A security is a financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option. A security is a fungible, negotiable financial instrument that represents some type of financial value. The company or entity that issues the security is known as the issuer.

Security Include:

• Share, scripts, stock, bond, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or body corporate;
• Derivative;
• Unit or any instrument issued by any collective investment scheme to investors in such scheme;
• Security receipt as defined in clause (zg) of section 2 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 {SARFAESI 2002};
• Units or any other such instrument issued to the investor under any mutual fund scheme; {certain exception there};
• Any certificate or instrument (by whatever name called), issued to an investor by any issuer being a special purpose distinct entity which possess any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable, including mortgage debt, as the case may be;
• Government securities;
• Such other instrument as may be declared by the Central Government to be securities {onshore rupee bond issued by multilateral institutions};
• Rights or interest in securities. [Section 2(h) of Securities Contract (Regulation) Act, 1956]

Perpetual Debt Instrument:

Financial institutions in India use perpetual debt instruments to raise capital. Banks issue these unsecured debt instruments as bonds or debentures subordinate to the depository claims. For PDIs to qualify for “Tier I” capital inclusion, it must meet capital adequacy purposes as stated by the Reserve Bank of India.
BANK:

For the purpose of this chapter, “Bank” means any bank included in the Second Schedule to the Reserve Bank of India Act, 1934. This schedule include list of banks on which these listing regulations applicable.

For Better understanding we are reproducing below the extract of Chapter V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations)

CHAPTER V

Obligations Of Listed Entity Which Has Listed Its Non-Convertible Debt Securities Or Non-Convertible Redeemable Preference Shares Or Both

Applicability.

49. (1) The provisions of this chapter shall apply only to a listed entity which has listed its ‘Non-convertible Debt Securities’ and/or ‘Non-Convertible Redeemable Preference Shares’ on a recognised stock exchange in accordance with Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 or Securities and Exchange Board of India (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013 respectively.

(2) The provisions of this chapter shall also be applicable to “perpetual debt instrument” and “perpetual non-cumulative preference share” listed by banks.

Explanation (1).- For the purpose of this chapter, “Bank” means any bank included in the Second Schedule to the Reserve Bank of India Act, 1934.

Explanation (2).- For the purpose of this chapter, if the listed entity has listed its non-convertible redeemable preference shares:

(i) The reference to “interest” may also read as dividend;

(ii) The provisions concerning debenture trustees and security creation (or asset cover or charge on assets) shall not be applicable for “non-convertible redeemable preference shares”

Intimation to stock exchange(s).

50. (1) The listed entity shall give prior intimation to the stock exchange(s) at least eleven working days before the date on and from which the interest on debentures and bonds, and redemption amount of redeemable shares or of debentures and bonds shall be payable.

(2) The listed entity shall intimate the stock exchange(s), its intention to raise funds through new non-convertible debt securities or non-convertible redeemable preference shares it proposes to list either through a public issue or on private placement basis, prior to issuance of such securities:

Provided that the above intimation may be given prior to the meeting of board of directors wherein the proposal to raise funds through new non convertible debt securities or non-convertible redeemable preference shares shall be considered.

(3) The listed entity shall intimate to the stock exchange(s), at least two working days in advance, excluding the date of the intimation and date of the meeting, regarding the meeting of its board of directors, at which the recommendation or declaration of issue of non convertible debt securities or any other matter affecting the rights or interests of holders of non convertible debt securities or non convertible redeemable preference shares is proposed to be considered.

Disclosure of information having bearing on performance/operation of listed entity and/or price sensitive information.

51. (1) The listed entity shall promptly inform the stock exchange(s) of all information having bearing on the performance/operation of the listed entity, price sensitive information or any action that shall affect payment of interest or dividend of non-convertible preference shares or redemption of non convertible debt securities or redeemable preference shares.

Explanation.- The expression ‘promptly inform’shall imply that the stock exchange must be informed as soon as practically possible and without any delay and that the information shall be given first to the stock exchange(s) before providing the same to any third party.

(2) Without prejudice to the generality of sub-regulation(1), the listed entity who has issued or is issuing non convertible debt securities and/or non-convertible redeemable preference shares shall make disclosures as specified in Part B of Schedule III.

Financial Results.

52. (1)The listed entity shall prepare and submit un-audited or audited financial results on a half yearly basis in the format as specified by the Board within forty five days from the end of the half year to the recognised stock exchange(s).

(2) The listed entity shall comply with following requirements with respect to preparation, approval, authentication and publication of annual and half-yearly financial results:

(a) Un-audited financial results shall be accompanied by limited review report prepared by the statutory auditors of the listed entity or in case of public sector undertakings, by any practising Chartered Accountant, in the format as specified by the Board:

Provided that if the listed entity intimates in advance to the stock exchange(s) that it shall submit to the stock exchange(s) its annual audited results within sixty days from the end of the financial year, un-audited financial results for the last half year accompanied by limited review report by the auditors need not be submitted to stock exchange(s).

(b) Half-yearly results shall be taken on record by the board of directors and signed by the managing director / executive director.

(c)The audited results for the year shall be submitted to the recognised stock exchange(s) in the same format as is applicable for half-yearly financial results.

(d) If the listed entity opts to submit un-audited financial results for the last half year accompanied by limited review report by the auditors, it shall also submit audited financial results for the entire financial year, as soon as they are approved by the board of directors.

(e) Modified opinion(s) in audit reports that have a bearing on the interest payment/ dividend payment pertaining to non-convertible redeemable debentures/ redemption or principal repayment capacity of the listed entity shall be appropriately and adequately addressed by the board of directors while publishing the accounts for the said period.

(3) (a) The annual audited financial results shall be submitted along with the annual audit report and either Form A for audit report with unmodified opinion, or Form B for audit report with modified opinion.

(b) The Form B and the accompanying annual audit report submitted in terms of clause (a) shall be reviewed by the stock exchange(s) and the Qualified Audit Report Review Committee in the manner specified in Schedule VIII.

(c)The listed entity shall on the direction issued by the Board, carry out the necessary steps, for rectification of modified opinion and/or submission of revised pro-forma financial results, in the manner specified in Schedule VIII.

(d) The applicable formats of Form A and Form B shall be specified by the
Board from time to time.

(4) The listed entity, while submitting half yearly / annual financial results, shall disclose the following line items along with the financial results:

(a) credit rating and change in credit rating (if any);

(b) asset cover available, in case of non convertible debt securities;

(c) debt-equity ratio;

(d) previous due date for the payment of interest/ dividend for non-convertible redeemable preference shares/ repayment of principal of non-convertible preference shares /non convertible debt securities and whether the same has been paid or not; and,

(e) next due date for the payment of interest/ dividend of non-convertible preference shares /principal along with the amount of interest/ dividend of non-convertible preference shares payable and the redemption amount;

(f) debt service coverage ratio;

(g) interest service coverage ratio;

(h) outstanding redeemable preference shares (quantity and value);

(i) capital redemption reserve/debenture redemption reserve;

(j) net worth;

(k) net profit after tax;

(l) earnings per share:

Provided that the requirement of disclosures of debt service coverage ratio, asset cover and interest service coverage ratio shall not be applicable for banks or non banking financial companies registered with the Reserve Bank of India.

Provided further that the requirement of this sub- regulation shall not be applicable in case of unsecured debt instruments issued by regulated financial sector entities eligible for meeting capital requirements as specified by respective regulators.

(5) While submitting the information required under sub- regulation (4), the listed entity shall submit to stock exchange(s), a certificate signed by debenture trustee that it has taken note of the contents.

(6) The listed entity which has listed its non convertible redeemable preference shares shall make the following additional disclosures as notes to financials:

(a) profit for the half year and cumulative profit for the year;

(b) free reserve as on the end of half year;

(c)securities premium account balance (if redemption of redeemable preference share is to be done at a premium, such premium may be appropriated from securities premium account):

Provided that disclosure on securities premium account balance may be provided only in the year in which non convertible redeemable preference shares are due for redemption;

(d) track record of dividend payment on non convertible redeemable preference shares:

Provided that in case the dividend has been deferred at any time, then the actual date of payment shall be disclosed;

(e) breach of any covenants under the terms of the non convertible redeemable preference shares:

Provided that in case a listed entity is planning a fresh issuance of shares whose end use is servicing of the non convertible redeemable preference shares (whether dividend or principle redemption), then the same shall be disclosed whenever the listed entity decided on such issuances.

(7) The listed entity shall submit to the stock exchange on a half yearly basis along with the half yearly financial results, a statement indicating material deviations, if any, in the use of proceeds of issue of non convertible debt securities and non-convertible redeemable preference shares from the objects stated in the offer document.

(8) The listed entity shall, within two calendar days of the conclusion of the meeting of the board of directors, publish the financial results and statement referred to in sub-regulation (4), in at least one English national daily newspaper circulating in the whole or substantially the whole of India.

Annual Report.

53. The annual report of the listed entity shall contain disclosures as specified in Companies Act, 2013 along with the following:

(a) audited financial statements i.e. balance sheets, profit and loss accounts etc;

(b) cash flow statement presented only under the indirect method as prescribed in Accounting Standard-3/ Indian Accounting Standard 7, mandated under Section 133 of the Companies Act, 2013 read with relevant rules framed thereunder or by the Institute of Chartered Accountants of India, whichever is applicable;

(c) auditors report;

(d) directors report;

(e) name of the debenture trustees with full contact details;

(f) related party disclosures as specified in Para A of Schedule V.

Asset Cover.

54. (1) In respect of its listed non-convertible debt securities, the listed entity shall maintain hundred per cent. asset cover sufficient to discharge the principal amount at all times for the non-convertible debt securities issued.

(2) The listed entity shall disclose to the stock exchange in quarterly, half-yearly, year-to-date and annual financial statements, as applicable, the extent and nature of security created and maintained with respect to its secured listed non-convertible debt securities.

(3) The requirement specified in sub-regulation (1), shall not be applicable in case of unsecured debt securities issued by regulated financial sector entities eligible for meeting capital requirements as specified by respective regulators.

Credit Rating.

55. Each rating obtained by the listed entity with respect to non-convertible debt securities shall be reviewed at least once a year by a credit rating agency registered by the Board.

Documents and Intimation to Debenture Trustees.

56. (1) The listed entity shall forward the following to the debenture trustee promptly:

(a) a copy of the annual report at the same time as it is issued along with a copy of certificate from the listed entity’s auditors in respect of utilisation of funds during the implementation period of the project for which the funds have been raised:

Provided that in the case of debentures or preference shares issued for financing working capital or general corporate purposes or for capital raising purposes the copy of the auditor’s certificate may be submitted at the end of each financial year till the funds have been fully utilised or the purpose for which these funds were intended has been achieved.

(b) a copy of all notices, resolutions and circulars relating to –

(i) new issue of non convertible debt securities at the same time as they are sent to shareholders/ holders of non convertible debt securities;

(ii) the meetings of holders of non-convertible debt securities at the same time as they are sent to the holders of non convertible debt securities or advertised in the media including those relating to proceedings of the meetings;

(c) intimations regarding:

(i) any revision in the rating;

(ii) any default in timely payment of interest or redemption or both in respect of the non convertible debt securities;

(iii) failure to create charge on the assets;

(d) a half-yearly certificate regarding maintenance of hundred percent. asset cover in respect of listed non convertible debt securities, by either a practicing company secretary or a practicing chartered accountant, along with the half yearly financial results:

Provided that submission of such half yearly certificates is not applicable in cases where a listed entity is a bank or non banking financial companies registered with Reserve Bank of India or where bonds are secured by a Government guarantee.

(2) The listed entity shall forward to the debenture trustee any such information sought and provide access to relevant books of accounts as required by the debenture trustee.

(3) The listed entity may, subject to the consent of the debenture trustee, send the information stipulated in sub-regulation (1), in electronic form/fax.

Other submissions to stock exchange(s).

57. (1) The listed entity shall submit a certificate to the stock exchange within two days of the interest or principal or both becoming due that it has made timely payment of interests or principal obligations or both in respect of the non convertible debt securities.

(2) The listed entity shall provide an undertaking to the stock exchange(s) on annual basis stating that all documents and intimations required to be submitted to Debenture Trustees in terms of Trust Deed and Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 have been complied with.

(3) The listed entity shall forward to the stock exchange any other information in the manner and format as specified by the Board from time to time.

Documents and information to holders of non – convertible debt securities and non-convertible preference shares

58. (1) The listed entity shall send the following documents:

(a) Soft copies of full annual reports to all the holders of non convertible preference share who have registered their email address(es) for the purpose;

(b) Hard copy of statement containing the salient features of all the documents, as specified in Section 136 of Companies Act, 2013 and rules made thereunder to those holders of non convertible preference share who have not so registered;

(c)Hard copies of full annual reports to those holders of non convertible debt securities and non convertible preference share, who request for the same.

(d) Half yearly communication as specified in sub-regulation (4) and (5) of regulation 52, to holders of non convertible debt securities and non convertible preference shares;

(2)The listed entity shall send the notice of all meetings of holders of non convertible debt securities and holders of non-convertible redeemable preference shares specifically stating that the provisions for appointment of proxy as mentioned in Section 105 of the Companies Act, 2013, shall be applicable for such meeting.

(3) The listed entity shall send proxy forms to holders of non convertible debt securities and non-convertible redeemable preference shares which shall be worded in such a manner that holders of these securities may vote either for or against each resolution.

Structure of non convertible debt securities and non convertible redeemable preference shares.

59. (1) The listed entity shall not make material modification without prior approval of the stock exchange(s) where the non convertible debt securities or non-convertible redeemable preference shares, as applicable, are listed, to:

(a)the structure of the debenture in terms of coupon, conversion, redemption, or otherwise.

(b)the structure of the non-convertible redeemable preference shares in terms of dividend of non-convertible preference shares payable, conversion, redemption, or otherwise.

(2) The approval of the stock exchange referred to in sub-regulation (1) shall be made only after:

(a)approval of the board of directors and the debenture trustee in case of non-convertible debt securities and

(b) after complying with the provisions of Companies Act, 2013 including approval of the consent of requisite majority of holders of that class of securities.

Record Date

60. (1) The listed entity shall fix a record date for purposes of payment of interest, dividend and payment of redemption or repayment amount or for such other purposes as specified by the stock exchange.

(2) The listed entity shall give notice in advance of at least seven working days (excluding the date of intimation and the record date) to the recognised stock exchange(s) of the record date or of as many days as the stock exchange(s) may agree to or require specifying the purpose of the record date.

Terms of non convertible debt securities and non convertible redeemable preference shares.

61. (1) The listed entity shall ensure timely payment of interest or dividend of non-convertible redeemable preference shares or redemption payment: Provided that the listed entity shall not declare or distribute any dividend wherein it has defaulted in payment of interest on debt securities or redemption thereof or in creation of security as per the terms of the issue of debt securities:

Provided further that this requirement shall not be applicable in case of unsecured debt securities issued by regulated financial sector entities eligible for meeting capital requirements as specified by respective regulators.

(2) The listed entity shall not forfeit unclaimed interest/dividend and such unclaimed interest/dividend shall be transferred to the ‘Investor Education and Protection Fund’ set up as per Section 125 of the Companies Act, 2013.

(3) Unless the terms of issue provide otherwise, the listed entity shall not select any of its listed securities for redemption otherwise than pro rata basis or by lot.

(4) The listed entity shall comply with requirements as specified in regulation 40 for transfer of securities including procedural requirements specified in Schedule VII.

Website.

62. (1) The listed entity shall maintain a functional website containing the
following information about the listed entity:-

(a) details of its business;

(b) financial information including complete copy of the annual report including balance sheet, profit and loss account, directors report etc;

(c)contact information of the designated officials of the listed entity who are responsible for assisting and handling investor grievances;

(d) email address for grievance redressal and other relevant details;

(e) name of the debenture trustees with full contact details;

(f)the information, report, notices, call letters, circulars, proceedings, etc concerning non-convertible redeemable preference shares or non convertible debt securities;

(g) all information and reports including compliance reports filed by the listed entity;

(h) information with respect to the following events:

(i) default by issuer to pay interest on or redemption amount;

(ii) failure to create a charge on the assets;

(iii) revision of rating assigned to the non convertible debt securities:

(2)The listed entity may also issue a press release with respect to the events specified in sub-regulation (1).

(3)The listed entity shall ensure that the contents of the website are correct and updated at any given point of time.

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[1] DISCLAIMER: For the purpose of this chapter, if the listed entity has listed its non-convertible redeemable preference shares:

(i)The reference to “interest” may also read as dividend;

(ii) The provisions concerning debenture trustees and security creation (or asset cover or charge on assets) shall not be applicable for “non-convertible redeemable preference shares”

[2] As per “The Securities Contracts (Regulation) Act, 1956, “Recognized Stock Exchange [Section 2(f)] means a stock exchange which is for the time being recognized by the Central Government under Section 4 of the Act.

[3] Any day (other than Sunday or legal holiday) on which legal business can be conducted. Whether Saturday is a working day or not depends on the custom or usage of the trade or jurisdiction. Any day other than Sunday or gazette or statutory holiday. (as per businessdictionary.com)

[4] It is on discretion of Listed entity to inform stock either before Board Meeting or after Board meeting in which proposal to raise funds is discussed.

[5] Detailed discussion on Schedule III Part B we will do in separate article. { The listed entity shall promptly inform to the stock exchange(s) expected default in timely payment of interests/preference dividend or redemption or repayment amount, any events such as strikes and lock outs, delay/ default in payment of interest or dividend / principal amount /redemption for a period of more than three months from the due date}.

[6] Definition of Executive Director given in Rule 1(K) of Companies (Specification of definition details) Rules, 2014- Executive Director means a whole-time Director as defined in clause (94) of Section 2 of the Act.

Clause (94) section 2 of Companies Act, 2013 Whole time director includes a director in the whole-time employment of the Company.

[7] All the term used below will be defined in a separate article.

[8] cash flow statement presented only under the indirect method as prescribed in Accounting Standard-3/ Indian Accounting Standard 7, mandated under Section 133 of the Companies Act, 2013 read with relevant rules framed there under or by the Institute of Chartered Accountants of India, whichever is applicable

[9] Seven days excluding the date of intimation and the record date

[10] Investor Education and Protection Fund.

[11] Transfer or transmission or transposition of securities.

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)