Sebi merges debt securities rules into single regulation

To ease the compliance burden on listed entities, Sebi has merged rules pertaining to the issuance of debt securities into a single regulation.

The move comes after the board of Sebi approved a proposal in this regard in June.

As per the notification, the regulator merged ILDS (Issue and Listing of Debt Securities) rules and NCRPS (Non-Convertible Redeemable Preference Shares) rules into a single regulation to be called -- Sebi (Issue and Listing of Non-Convertible Securities) Regulations.

Under the new framework, issuers other than unlisted REITs (Real estate investment trusts) and InvITs (Infrastructure investment trusts), who are in existence for less than 3 years, have been facilitated to tap the bond market on certain conditions, according to a notification issued on Monday.

This condition includes the issuance of their debt securities is made only on a private placement basis; the issue is made on the EBP (electronic book mechanism) platform irrespective of the issue size, and the issue is open for subscription only to qualified institutional buyers (QIBs).

The move will enable special purpose vehicles created for specific infrastructure purposes, NBFCs, listed REITs as well as InvITs and other companies who propose to list debt securities purely on a private placement basis, but who do not have a three-year existence history, to list their debt securities issued on private placement basis.

In addition, parameters for identification of risk factors have been introduced under the new rules to assist issuers in disclosing pertinent risk factors on risks intrinsic to the issuer as well as the instrument, other risk factors, which may have an impact on the issue, among others.

The option for call and put has been introduced in case of debt securities issued on a private placement basis. This will provide greater flexibility to the issuers and investors of debt securities and NCRPS as well.

Issuers who have cured the default in payment of interest/dividend/redemption amount to raise funds through non-convertible securities have been permitted to file shelf prospectus post such curing of default.

This is subject to that the issuers have cured the default at least 30 days before filing the draft shelf prospectus.

The provision of creation of charge on the assets and properties of the issuer has been harmonised with the Companies Act, thus allowing the issuer to have an option to create a charge over its properties or assets, shares or any interest thereon, of the issuer or its subsidiaries or its holding companies or its associate companies.

The move will provide greater flexibility to the issuers for the creation of charge.

The requirement of the abridged prospectus has been streamlined to enhance readability for the investor.

In case an issuer wishes to roll over the debt securities, the provision of e-voting has been introduced in addition to the postal ballot to facilitate issuers to seamlessly obtain voting for passing the resolution. This will also encourage wider investor participation in the voting.

"The roll-over shall be approved by a majority of holders holding not less than three-fourths in value through postal ballot or e-voting of such debt securities in a duly convened meeting as per the offer document," Sebi said.

The new regulations will come into force on the seventh day -- which is August 16 -- from the date of publication in the official gazette.

Following the amendment, the regulator on Tuesday issued operational guidelines for issuance, listing and trading of non-convertible securities, securitised debt instruments, security receipts, municipal debt securities and commercial papers.

It has issued guidelines about the application process in case of public issues of securities and timelines for listing, application form and abridged prospectus; disclosure of cash flows and other disclosures in the offer document.

Also, the regulator has issued an operational framework, for the requirement of additional disclosures by the non-banking finance company, housing finance company and public financial institution as well as for transactions in defaulted debt securities post maturity date/ redemption date, among others.