Proposed amendments to SEBI (Debenture Trustee) Regulations, 1993

CONSULTATIVE PAPER
on the proposed amendments to SEBI (Debenture Trustee) Regulations, 1993

A. Background

1. SEBI had set up a Task Force comprising of SEBI officials and representative of Debenture Trustees (DTs) for examining the “Challenges in performing the obligations and duties as Debenture Trustees to protect the interests of the debenture holders”. The task force discussed the amendments to be made in the DT Regulations to harmonise the existing provisions with that of the Companies Act 2013, to fortify the existing provisions to enable the debenture trustees to perform the task of securing the interest of the investors and consequential changes. The Task Force has submitted its recommendations which, inter alia, include proposal regarding amendments to DT Regulations which can be classified in three broad issues:

S.N.Details of Amendments1.Amendments required in SEBI (Debenture Trustee Regulations), 1993 in the light of the changes in the Companies Act 2013, (Share Capital and Debentures) Rules 2014 etc.2.Changes on account of amendment in other regulations i.e SEBI (Substantial Acquisition of Shares and Takeovers) Regulations) 2011, etc.3.Consequential changes for improvement

B. Need for Review

2. It is observed that several existing provisions in the DT Regulations had reference to the Companies Act, 1956 which have been repealed and replaced by the Companies Act, Therefore, such provisions in the DT Regulations require to be amended to synchronise them with the corresponding provisions in the Companies Act, 2013.

3. It is felt that several existing provisions in the DT Regulations require changes! modifications! improvements to enable the debenture trustees to perform the task of securing the interest of the investors more effectively.

4. It is felt that the provisions regarding liability for action against Debenture Trustees with regard to default! non-compliance require to be modified to streamline them with other SEBI Regulations so as to have consistency.

C. Proposal

5. The Task Force has submitted its recommendations which, inter alia, include proposal regarding amendments to the DT Regulations. The proposed amendments to the DT Regulations along with the rationale for the same is placed as under:

5.1 Amendments required in SEBI ( Debenture Trustee Regulations), 1993 in the light of the changes in the Companies Act 2013, Companies (Share Capital and Debentures) Rules 2014 etc.- For the purpose of harmonization in the provisions given in DT Regulations with those given in the Companies Act 2013, it is proposed that amendments may be made in the following existing provisions in the DT Regulations:

a) Provisions relating to definition of ‘associate’, ‘debenture’ and ‘principal officer’.

b) Provisions relating to agreement between DT and the issuer.

c) Provisions relating to appointment as debenture trustee.

d) Provisions relating to the contents of the Trust Deed.

e) Provisions relating to the Board’s right to inspect and disciplinary proceedings.

Details as regards the existing provisions in the DT Regulations, proposed amendments and the rationale are placed at the Annexure-1 to this Consultative Paper.

5.2 Changes on account amendment of the other regulations i.e SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, etc. – For the purpose of harmonization in the provisions given in DT Regulations with those given in SEBI (Substantial Acquisition of Shares and Takeovers) Regulations – (SAST) 2011,etc.,it is proposed that amendments may be made in the following existing provisions in the DT Regulations:

a) Provision relating to definition of ‘change in control’.

b) Provision relating to definition of ‘insurance company’

Details as regards the existing provisions in the DT Regulations, proposed amendments and the rationale are placed at the Annexure-2 to this Consultative Paper.

5.3 Consequential changes for improvement – For the purpose of streamlining the provisions regarding liability for action against Debenture Trustees with regard to default! non-compliance, it is proposed that amendments may be made in the following existing provisions in the DT Regulations:

a) Provision relating to definition of ‘body corporate’, ‘debenture trustee’. and ‘issue’.

b) Introducing provision relating to definition of ‘Recognised Stock Exchange’ and certification requirement of the Compliance Officer.

c) Provisions relating to the duties of the debenture trustees.

d) Provisions relating to end-utilisation certificate from the issuer’s auditors.

e) Provisions relating to maintenance of books of account, records and documents, by the debenture trustee.

f) Provisions relating to the liabilities for actions in case of default.

Details as regards the existing provisions in the DT Regulations, proposed amendments and the rationale are placed at the Annexure-3 to this Consultative Paper.

D. Public Comments

6. In light of the above, public comments are invited on the proposals contained in the Annexure – 1, 2 and 3 to this Consultative Paper. Comments! suggestions may be provided as below:

Name of entity / person / intermediary/ Organization:Sr. No.Pertains to serial number in Annexure – 1, 2 and 3Suggestion (s)Rationale

7. Comments may be forwarded by email to dt@sebi.gov.inor lalits@sebi.gov.inor may be sent by post to the following address latest by March 08, 2017.

Deputy General Manager

Market Intermediaries Regulation and Supervision Department-3 Securities and Exchange Board of India

SEBI Bhavan, Plot No. C4-A, “G” Block, Bandra Kurla Complex Bandra (East), Mumbai – 400 051

Ph: 022-26449312

Issued on: February 16, 2017