Summary: SEBI, through Notification F. No. SEBI/LAD-NRO/GN/2025/239, Dated: 27th March, 2025, introduced Chapter VA in the SEBI (LODR) Regulations, 2015, applying corporate governance norms to listed entities with non-convertible debt securities. The provisions apply to entities with listed non-convertible debt securities valued at ₹1,000 crore or more as of 31st March 2025, provided they do not have any listed specified securities, such as equity or convertible securities. These “high value debt listed entities” (HVDLEs) must comply with the regulations, including within six months if the ₹1,000 crore threshold is crossed during the financial year. The rules will remain applicable for three consecutive financial years but may cease if the outstanding debt falls below the threshold for this period. The definition of non-convertible debt securities includes debentures, bonds, and similar fixed-term instruments but excludes government-issued bonds and money market instruments. The provisions aim to strengthen corporate governance practices for these entities and ensure greater transparency and accountability.
Let’s have a detailed overview of the Applicability of “CHAPTER VA”
Q1. WHAT IS THE APPLICABILITY OF “CHAPTER VA”
REGULATION 62C (1) OF SEBI (LODR) REGULATION, 2015
The provisions of this chapter shall apply to a listed entity which only has non-convertible debt securities listed, with an outstanding value of Rupees One Thousand Crore and above and does not have any listed specified securities.
Explanation (1): — The ‘high value debt listed entities’ shall be determined on basis of value of principal outstanding of listed debt securities as on March 31, 2025, irrespective of the date of notification of this amendment.
Explanation (2): — The entities falling in sub-regulation (1) of the regulation 62C shall be referred to a ‘high value debt listed entity’ (HVDLE) for the purpose of this chapter: Provided that in case the value of the outstanding listed non-convertible debt securities becomes equal to or greater than the specified threshold of Rupees One Thousand Crore during the financial year, it shall ensure compliance with these provisions within six months from the date of such trigger and the disclosures of such compliance may be made in corporate governance compliance report on and from third quarter, following the date of the trigger.
INTERPRETATION
To understand the applicability of this chapter we have to first understand what does non-convertible debt securities means
IN TERMS OF REGULATION 2(1) (T) OF SEBI (LODR) REGULATION, 2015
“Non-convertible debt securities” means ‘debt securities’ as defined under the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021
ACCORDINGLY IN TERMS OF REGULATION 2 (1) (K) OF SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE AND LISTING OF NON-CONVERTIBLE SECURITIES) REGULATIONS, 2021
Debt Security Means: Non-Convertible Debt securities with a fixed maturity period which create or acknowledge indebtedness and includes debentures, bonds or any other security whether constituting a charge on the assets/properties or not, but excludes security receipts, securitized debt instruments, money market instruments regulated by the Reserve Bank of India, and bonds issued by the Government or such other bodies as may be specified by the Board.
The above definition is inclusive and includes debentures, bonds or any other security whether constituting a charge on the assets/properties or not, but which is of a Fixed term and create or acknowledge indebtedness
So, any security fulfilling the above mentioned criteria will be termed as Non-convertible debt securities, for the purpose of applicability of “CHAPTER VA”
Accordingly any entity which has only listed its Non-convertible debt securities with an outstanding value of Rupees One Thousand Crore and above shall have to comply with the provisions of CHAPTER VA.
- Here focus should be given to the words “OUTSTANDING VALUE”, which means value of the Non-convertible debt securities of the company as on 31st March, 2025.
- Further Reg 62C (1) specifically excludes entity which has listed specified securities, according to Reg 2 (1) (eee) of Sebi (ICDR) Regulation, 2018 specified securities means equity shares and convertible securities.
So, any entity which has listed non-convertible debt securities, with an outstanding value of Rupees One Thousand Crore and above as on 31st March, 2025, and which has no listed specified securities as on date shall have to comply with provisions of Corporate Governance as specified under “CHAPTER VA”
Q2. WHAT IF COMPANY CROSSES THE THRESHOLD PRESCRIBED DURING THE FINANCIALS YEAR?
As per Explanation 2 of Reg 62C. (1) of SEBI (LODR) REGULATION, 2015
If Value of the outstanding listed non-convertible debt securities becomes equal to or greater than the specified threshold of Rupees One Thousand Crore during the financial year, it shall ensure compliance with these provisions WITHIN SIX MONTHS from the date of such trigger.
So, company has to comply with the provisions of “CHAPTER VA” within 6 months from the date of crossing the threshold of Rupees One Thousand Crore.
Q3. SUNSET PROVISION FOR THE APPLICABILITY OF “CHAPTER VA”?
Reg 62C (2) States once the provisions of this Chapter become applicable to a ‘high value debt listed entity’, the said regulations shall continue apply till the value of the outstanding listed debt securities as on March 31 in a year, reduces and remains below the specified threshold for a period of three consecutive financial years.
Accordingly if the company has crossed the threshold, then the provisions of Chapter VA Shall apply for a continuous period of Three Financial year but if the outstanding value of non-convertible debt securities as on 31st March during these 3 financial year remains below the specified threshold, then the provisions of Chapter VA shall cease to apply on the company at the end of Third Financial year.
Author Bio
