To alleviate the compliance burden on listed entities, Sebi has merged the rules relating to the issuance of debt securities into a single regulation.
The move comes after Sebi’s board of directors approved a proposal in this regard in June.
In accordance with the notification, the regulator merged the ILDS rules (issuance and listing of debt securities) and the NCRPS rules (non-convertible redeemable preferred shares) into a single regulation which will be called the Sebi regulation (issuance and listing of non-convertible securities). convertible). .
Under the new framework, issuers other than REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts), which have been in existence for less than 3 years, have been made easier to operate the bond market under certain conditions, according to a notification. issued on Monday.
This condition includes that the issuance of their debt securities is done solely on the basis of a private placement; the issue is made on the EBP (electronic book Mechanism) platform regardless of the size of the issue, and the issue is open for subscription only to qualified institutional buyers (QIB).
This decision will allow special purpose vehicles created for specific infrastructure purposes, NBFCs, listed REITs as well as InvITs and other companies that offer to list debt securities solely on the basis of a private placement, but which have no history of existence of three years, to register their debt securities issued on the basis of a private placement.
In addition, risk factor identification parameters have been introduced as part of the new rules to help issuers disclose relevant risk factors on risks intrinsic to the issuer as well as to the instrument, other risk factors, which may have an impact on the emission, among others.
The call and put option has been introduced for debt securities issued on the basis of a private placement. This will provide greater flexibility to issuers and investors of debt securities and NCRPS as well.
Issuers who remedied the default on interest / dividend / redemption payments to raise funds using non-convertible securities were allowed to file a shelf prospectus after such resolution of the default.
This is conditional on the issuers having remedied the default at least 30 days before filing the draft shelf prospectus.
The provision to create a charge on the assets and properties of the issuer has been harmonized with the Companies Act, thus allowing the issuer to have the option of creating a charge on its properties or assets, shares or any interest therein, of the issuer or its subsidiaries or its holding companies or associated companies.
The move will provide greater flexibility to issuers for the creation of charges.
The short prospectus requirement has been simplified to improve readability for the investor.
In the event that an issuer wishes to renew debt securities, electronic voting has been introduced in addition to postal voting to allow issuers to transparently obtain a vote for the adoption of the resolution. It will also encourage more investor participation in the vote.
“The rollover will be approved by a majority of holders holding at least three-quarters of the value by mail ballot or electronic vote of such debt securities at a meeting duly called in accordance with the offering document,” Sebi said.
The new regulations will come into force on the seventh day – ie August 16 – from the date of publication in the Official Journal.
Following the amendment, the regulator on Tuesday issued operational guidelines for the issuance, listing and trading of non-convertible securities, securitized debt securities, securities receipts, municipal debt securities and papers. commercial.
It has published guidelines on the application process in the event of a public issue of securities and the listing deadlines, the application form and the short prospectus; disclosure of cash flows and other information in the offering document.
In addition, the regulator issued an operational framework, for the requirement of additional disclosures by the non-bank finance company, the housing finance company and the public financial institution as well as for transactions in defaulted debt securities. after the due date / redemption date, among others.
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