Points to be considered while drafting Information Memorandum in case of Issue of NCDs on private placement basis

Serial No. Addressed to:

INFORMATION MEMORANDUM

ABC LTD

A private limited company incorporated under Companies Act, 1956/2013

Date of Incorporation: ………………

Registered Office………………………………………

Telephone No: …………………. Website: …………………………………….

Information Memorandum for issue of Non-Convertible Debentures on a Private Placement Basis Dated

…………………..

Background

This Information Memorandum is related to the Non-Convertible Debentures to be issued by ………………. (the “Issuer” or “Company”) on a private placement basis and contains relevant information and disclosures required for the purpose of issuing of the Non-Convertible Debentures. The issue of the Non-Convertible Debentures comprised in the Issue and described under this Information Memorandum has been authorised by the Issuer through a resolution passed by the board of directors of the Issuer on ……………………………………. and in accordance with the provisions of the Companies Act, 2013 and the Memorandum and Articles of Association of the Company.

Credit Rating

The Non-Convertible Debentures proposed to be issued by our Issuer have been rated by ………….. (“Rating Agency”). The Rating Agency has vide its letter dated …………………. assigned a rating of …………… in respect of the Non-Convertible Debentures. The above rating is not a recommendation to buy, sell or hold securities and investors should take their own decision. The ratings may be subject to revision or withdrawal at any time by the rating agency and should be evaluated independently of any other ratings. Please refer to Annexure II of this Information Memorandum for the letter issued by the Rating Agency disclosing the rating rationale adopted for the aforesaid rating.

Issue Schedule

Issue Opens on: ……………………………………….

Issue Closing on: ………………………………………

Deemed Date of Allotment: ……………………

The Issuer reserves the right to change the Issue Schedule including the Deemed Date of Allotment at is sole discretion, without giving any reasons or prior notice. The Issue shall be open for subscription during the banking hours on each day during the period covered by the Issue Schedule.

The Non-Convertible Debentures are proposed to be listed on the wholesale debt market of the …………………..

Registrar & Transfer Agent

Debenture Trustee

SECTION 1: DEFINITONS AND ABBREVIATIONS

Unless the context otherwise indicates or requires, the following terms shall have the meanings given below in this Information Memorandum.

Allot/Allotment/Allotted Unless the context otherwise requires or implies, the allotment of the Non-Convertible Debentures pursuant to this Issue.
Applicable Law Shall mean any statute, law, by-law, regulation, ordinance, rule, judgment, order, decree, clearance, approval, directive, guideline, policy, requirement, or other governmental restriction or any similar form of decision, or determination by, or any interpretation or administration of any of the foregoing by, any statutory or regulatory authority whether in effect as of the date of any Transaction Documents or thereafter and in each case as amended.
Application Form The form used by the recipient of this Disclosure Document, to apply for subscription to the Non-Convertible Debentures, which is annexed to this Information Memorandum and marked as Annex IV.
Board/Board of Directors The Board of Directors of the Issuer
Business Day Shall mean a day (other than a public holiday or a Sunday) on which banks are normally open for business in Chennai and / or Mumbai.
Crore ………………
Debenture Holders/ Investors The holders of the Non-Convertible Debentures issued by the Issuer and shall include the registered transferees of the Non-Convertible Debentures from time to time
Debenture Trustee ……………….
Debenture Trustee Agreement Agreement executed by and between the Debenture Trustee and the Company for the purposes of appointment of the Debentures Trustee to act as debenture trustee in connection with the issuance of the Non- Convertible Debentures.
Non-Convertible Debentures/NCDs ………………..Non-Convertible Debentures bearing a face value of Rs. ………………… each, aggregating to Rs. ………………………………………
Deemed Date of Allotment ……………………………………..
Depositories Act The Depositories Act, 1996, as amended from time to time
Depository A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time.
Depository Participant/DP A depository participant as defined under the Depositories Act
Director(s) Director(s) of the Issuer.
Disclosures Document/Information This document which sets out the information regarding the Non- Convertible Debentures being issued on a private placement basis.

Memorandum …………………………………….
EFT Electronic Fund Transfer
Event of Default Shall have the meaning provided to it in Clause 6.4
Financial Year/FY Twelve months period commencing from April 1 of a particular calendar year and ending on March 31 of the subsequent calendar year.
GAAP Generally Accepted Accounting Principles
Governmental Authority Shall mean the Government of India or the government of any other state of India or any ministry, department, board, authority, instrumentality, agency, corporation (to the extent acting in a legislative, judicial or administrative capacity and not as a contracting party with the Issuer) or commission under the direct or indirect control of the Government of India.
Interest Expense All interest, fees, and commissions incurred on deposit accounts of clients held by the Issuer, as well as commercial or concessionary borrowings by the Issuer.
Issue Private Placement of the Non-Convertible Debentures.
Issue Closing Date ………………………………………
Issue Opening Date ………………………………………
Issuer/Company ……………………………………….
Majority Debenture Holders Debenture Holders whose participation or share in the principal amount(s) outstanding with respect to the Non-Convertible Debentures aggregate to more than 75% (Seventy Five per cent) of the value of the nominal amount of the Non-Convertible Debentures for the time being outstanding.
Material Adverse Effect The effect or consequence of an event, circumstance, occurrence or condition which has caused, as of any date of determination, or could cause a material and adverse effect on

i. The business activities, operations, assets, liabilities, financial condition and credit standing of the Company; or

ii. The ability of the Company to perform its obligations under the Transaction Documents (as defined hereinafter); or

iii. The validity or enforceability of, or the effectiveness of any of the Transaction Documents (including the ability of any party to enforce any of its remedies thereunder).

Maturity Date ………………………………………
Mutual Fund A mutual fund registered with SEBI under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996

N.A. Not Applicable
NBFC Non-banking financial company as defined under Section 45I(f) of the Reserve Bank of India Act, 1934.
Net Worth Net Worth would comprise of paid-up capital plus free reserves including share premium but excluding revaluation reserves, plus investment fluctuation reserve and credit balance in profit & loss account, less debit balance in profit and loss account, accumulated losses and intangible assets. No general or specific provisions should be included in computation of net worth.
NSDL National Securities Depository Limited.
PAN Permanent Account Number.
Promoter ………………………………………..
R&T Agent ………………………………………
Rating Agency ………………………………………..
RBI Reserve Bank of India.
Record Date ……………………………………….
ROC Registrar of Companies.
Rs./INR Indian National Rupee
RTGS Real Time Gross Settlement
SEBI Securities and Exchange Board of India constituted under the Securities and Exchange Board of India Act, 1992 (as amended from time to time).
SEBI Debt Listing Regulations Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulation, 2008 issued by SEBI, as amended from time to time.
TDS Tax Deducted at Source
Terms & Conditions Shall mean the terms and conditions pertaining to the Issue as outlined in the Transaction Documents
Tier I Capital ………………………………………..
Tier II capital ……………………………………….
Transaction Documents Shall mean the documents executed or to be executed in relation to the issuance of the Non-Convertible Debentures as more particularly set out in Annexure I.
WDM Wholesale Debt Market.

SECTION 2: .NOTICE TO INVESTORS AND DISCLAIMERS

2.1 Issuer’s Disclaimer………………………

2.2 Disclaimer Clause Of The Stock Exchange ………………………

2.3 Disclaimer Clause Of SEBI ………………………

2.4 Disclaimer In Respect Of Juridiction ………………………

2.5 Disclaimer In Respect Of The Rating Agency ……………………….,

2.6 Issue Of Non-Convertible Debentures In Dematerialised Form ………………………

SECTION 3: RISK FACTORS

3.1 Repayment Is Subject To The Credit Risk Of The Issuer ………………………..

3.2 The Secondary Market For Non-Convertible Debentures May Be Illiquid………………………………….

3.3 Risks Relating To Our Business ………………………

3.4 Credit Risk & Rating Downgrade Risk ………………………

3.5 Tax Considerations And Legal Considerations ………………………….

3.6 Accounting Considerations ………………………….

3.7 Material Changes In Regulations To Which The Issuer Is Subject Could Impair The Issuer’s Ability To Meet Payment Or Other Obligations ………………………

3.8 Legality Of Purchase ………………………

3.9 Political And Economic Risk In India ………………………

Section 4: Financial Statements

The financial statements of the Issuer for the half year ended ……………, along with the audited financial statements for the ……………… are set out in Annexure V hereto.

SECTION 5: REGULATORY DISCLOSURES

The Information Memorandum is prepared in accordance with the provisions of SEBI Debt Listing Regulations and in this section, the Issuer has set out the details required as per Schedule I of the SEBI Debt Listing Regulations

  • Documents Submitted to the Exchanges

The following documents have been/shall be submitted to the BSE:

1. Memorandum and Articles of Association of the Issuer and necessary resolution(s) for the allotment of the Non-Convertible Debentures;

2. Copy of last 3 (Three) years audited Annual Reports;

3. Statement containing particulars of, dates of, and parties to all material contracts and agreements;

4. Copy of the Shareholder and Board/Committee Resolution authorising the borrowing and list of authorised signatories;

5. An undertaking from the Issuer stating that the necessary documents for the creation of the charge, including the Trust Deed would be executed within the time frame prescribed in the relevant regulations/acts/rules etc. and the same would be uploaded on the website of the BSE, where the debt securities have been listed, within 5 (five) working days of execution of the same; and

6. Any other particulars or documents that the recognised stock exchange may call as it deems fit.

  • Documents Submitted to Debenture Trustee

The following documents have been/shall be submitted to the Debenture Trustee:

  • Memorandum and Articles of Association of the Issuer and necessary resolution(s) for the allotment of the Non-Convertible Debentures;
  • Copy of last 3 (Three) years audited Annual Reports;
  • Statement containing particulars of, dates of, and parties to all material contracts and agreements;
  • Latest audited/limited review half yearly consolidated (wherever available) and standalone financial information (profit & loss statement, balance sheet and cash flow statement) and auditor qualifications, if any; and
  • An undertaking to the effect that the Issuer would, till the redemption of the debt securities, submit the details mentioned in the point above to the Trustee within the timelines as mentioned in Simplified Listing Agreement issued by SEBI vide circular No. SEBI/IMD/BOND/1/2009/11/05 dated May 11, 2009 as amended from time to time, for furnishing/publishing its half yearly/annual result. Further, the Issuer shall within 180 (One Hundred and Eighty) calendar days from the end of the financial year, submit a copy of the latest annual report to the Trustee and the Trustee shall be obliged to share the details submitted under this clause with all ‘Qualified Institutional Buyers’ and other existing Debenture Holders within 2 (two) Business Days of their specific
  • Name and Address of Registered Office of the Issuer

Name : __________

Registered Office of Issuer : __________

Compliance Officer of Issuer : __________

CFO of Issuer : __________

Registration Number :__________

Corporate Identification Number : __________

Phone No. : __________

Fax No. :__________

Contact Person : __________

Email :__________

Website of Issuer :__________

Auditors of the Issuer :__________

Trustee to the Issue : __________

Registrar to the Issue :__________

Credit Rating Agency of the Issue :__________

Sole Arrangers of the Issue :__________

5.4 A brief summary of business/activities of the Issuer and its line of business ..__________

1. Industry Overview__________

2. Current Corporate Status __________

3. Access to Funds: __________

4. __________

5. Regulatory Coverage __________

6. Stakeholder Involvement: __________

7. organisational Structure __________

8. Shareholders __________

9. Board of Directors __________

10. Company Credit Rating __________

11. Investment Thesis __________

12. Proven track record: __________

13. High creditability: __________

14. Strong risk management practices: __________

15. Diversification: …__________

16. Governance: __________

Key Operational and Financial Parameters for the last 3 audited years __________

Gross Debt: Equity Ratio of the Company:__________

Project cost and means of financing, in case of funding new projects:

N.A…………………

1. Details of change in auditors since the last three years

There has been no change in auditors for the last three years..

5.5 Details of borrowings of the Company, as on latest quarter end:

1. Details of secured loan facilities __________

2. Details of unsecured loan facilities __________

3. Details on Non-convertible Debentures __________

4. Details on Non-convertible Debentures __________

5. The amount of corporate guarantee issued by the Issuer along with name of the counterparty (like name of the subsidiary, JV entity, group company, etc.) on behalf of whom it has been issued. (if any):

6. Details of Commercial Paper……………………………………………………………

7. Details of rest of the borrowing (if any including hybrid debt like FCCB, Optionally Convertible Debentures/Preference Shares)

8. Details of all default/s and/or delay in payments of interest and principal of any kind of term loans, debt securities and other financial indebtedness including corporate guarantee issued by the company, in the past 5 years:

9. Details of outstanding borrowings taken/debt securities issued where taken/issued (i) for consideration other than cash, whether in whole or part, (ii) at a premium or discount, or (iii) in pursuance of an option:

SECTION 6 TRANSACTION DOCUMENTS AND KEY TERMS

6.1 Transaction Documents__________

The following documents shall be executed in relation to the Issue (“Transaction Documents”):

1. Debenture Trustee Agreement, which will confirm the appointment of GDA Trusteeship Limited as the Debenture Trustee (“Debenture Trustee Agreement”);

2. Debenture Trust Deed, which will set out the terms upon which the Non-Convertible Debentures are being issued and shall include the representations and warranties and the covenants to be provided by the Issuer (“Debenture Trust Deed”);

3. Deed of Hypothecation, executed by the Issuer which shall create the security in favour of the Debenture Trustee (“Deed of Hypothecation”)

Such other documents as agreed between the Issuer and the Debenture Trustee. The Transaction Documents shall be executed on or prior to the Issue Closing Date

6.2 Representations and Warranties of the Issuer

The Issuer hereby makes the following representations and warranties. These representations and warranties along with additional representations and warranties shall be set out in the Transaction Documents.

  • Existence and Ability………………………………..
  • Power and Authority………………………………..
  • Valid and Binding Obligation…………………….
  • No Violation……………………………………………
  • Use of Proceeds………………………………………
  • Absence of Defaults………………………………..
  • Litigation……………………………………………….
  • Insolvency………………………………………………
  • Borrowings…………………………………………….
  • Governmental Approvals and Licenses…………
  • Compliance with Applicable Laws……………….
  • Accounts………………………………………………..
  • No Immunity…………………………………………

6.3 Covenants of the Issuer

  • Financial Covenants……………………………………..
  • Material Adverse Effect…………………………………
  • Compliance with Applicable Laws…………………..
  • Listing……………………………………………………….

6.4 Events of Default

  • Payment Defaults………………………………………………………
  • Insolvency / Inability to Pay Debts………………………………
  • Misrepresentation………………………………………………………
  • Material Adverse Change…………………………………………..
  • Liquidation or Dissolution of the Company / Appointment of Receiver or Liquidator……..
  • Creditors’ Process……………………………………………….
  • Transaction Documents……………………………………….
  • Unlawfulness…………………………………………………..
  • Repudiation………………………………………………………..
  • Breach of Terms of this Deed……………………………….

6.6 Consequences of Events of Default

SECTION 7: OTHER INFORMATION AND APPLICATION PROCESS

7.1 Mode of Transfer/Transmission of Non-Convertible Debentures .

7.2 Non-Convertible Debentures held in Dematerialised Form .

7.3 Trustee for the Debenture Holder(s) .

7.4 Sharing of Information .

7.5 Debenture Holder not a Shareholder .

7.6 Modification of Non-Convertible Debentures .

7.7 Right to accept or reject Applications .

7.8 Notice.

7.9 Issue Procedure .

7.10 Application Procedure .

7.11 Fictitious Application .

7.12 Basis of Allotment .

7.13 Payment Instructions .

7.14 Eligible Investors .

7.15 Procedure for Applying for Dematerialised Facility .

7.16 Depository Arrangements.

7.17 List of Beneficiaries .

7.18 Application under Power of Attorney .

7.19 Procedure for application by Mutual Funds and Multiple Applications .

7.20 Documents to be provided by Investors .

7.21 Applications to be accompanied with Bank Account Details .

7.22 Succession .

7.23 Mode of Payment .

7.24 Effect of Holidays .

7.25 Tax Deduction at Source .

7.26 Letters of Allotment .

7.27 Deemed Date of Allotment .

7.28 Record Date .

7.29 Refunds.

7.30 Interest on Application Money.

7.31 PAN Number .

7.32 Payment on Redemption.

SECTION 8: DECLARATION

The Issuer declared that all the relevant provisions in the regulations/guideline issued by SEBI and other Applicable Law have been complied with and no statement made in this Information Memorandum is contrary to the provisions of the regulations/guidelines issued by SEBI and other Applicable Law, as the case may be. The information contained in this Information Memorandum is as applicable to privately placed debt securities and subject to information available with the Issuer. The extent of disclosures made in the Information Memorandum is consistent with disclosures permitted by regulatory authorities to the issue of securities made by the companies in the

Authorised Signatory

………………………………………

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One Comment

  1. Vartika Vijay says:

    whether Information memorandum and PAS-4 both are required for private company for issuing private placement Non convertible debentures?

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