Introduction: The process of maturity or redemption of bonds involves a series of meticulously defined compliances to ensure the orderly fulfillment of obligations by the issuing company towards its bondholders. These steps are designed to safeguard the interests of all stakeholders involved and ensure the integrity of the financial markets. From establishing a Debenture Redemption Reserve (DRR) to the final satisfaction of charges on the MCA portal, each compliance step plays a crucial role in the seamless execution of bond redemption.
STEP I:
1. Maintain Debenture Redemption Reserve at least 15% of the amount of its debentures maturing during the year, ending on the 31st day of March of the next year in any one or more methods of investment or deposits as given below:
a. Deposits with scheduled banks
b. Government treasury bills and commercial papers
c. Long-term bonds issued by the Government .
2. As per the Rule 18 (7) item (B) of sub-clause (iv) of clause (b) of the Companies (Share Capital and Debentures) Rules, 2014 the investment should be made before 30th April
3. The amount invested should be the same as the amount of the transfer made to the DRR. The ledger balance of the DRR and the ledger balance of the investment should be the same.
STEP II: Intimation to the Trustee regarding payment made to the Bond holders on due date along with intimation letter made to the Stock Exchange(s).
STEP III: Beneficiary Position as on redemption date.
STEP IV: No Dues Certificate from all the Bond Holders confirming that no dues are pending as on date and that Trustee can go ahead with release of charge OR Certificate from Independent CA confirming that all the dues against Bond Holders have been repaid and no dues are outstanding as on date.
STEP V: Bank Statement evidencing remittance of redemption amount.
STEP VI: ISIN extinguishment letter from NSDL
STEP VII: Quarterly Report (from 1st April till the date of redemption) to be submitted to Trustee.
STEP VIII: Post completion of Compliances (Debenture Trustees) will issue NOC for satisfaction of charges on MCA portal.
Conclusion: Completing the compliances for the maturity or redemption of bonds is a critical process that requires strict adherence to regulatory guidelines. By maintaining a Debenture Redemption Reserve, informing trustees of payments, and ensuring no dues are pending with bondholders, companies can efficiently navigate the redemption process. The issuance of a No Objection Certificate by the Debenture Trustees post-compliance marks the successful conclusion of obligations, thereby reinforcing the trust between issuers and investors. This systematic approach not only fulfills legal requirements but also strengthens the bond market’s stability and reliability.
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