Issue and Listing of Non-Convertible Securities

Responsibilities and Obligations of Debenture Trustees

Regulation 13 of the SEBI (Debenture Trustees) Regulations, 1993 lays down that no debenture trustee who has been granted a certificate by SEBI shall act as debenture trustee unless he enters into a written agreement with the body corporate before the opening of the subscription list for issue of debentures and the agreement inter alia contains that debenture trustee has agreed to act as such under the trust deed for securing an issue of debentures for the body corporate and the time limit within which the security for the debentures for the body corporate and the time limit within which the security for the debentures shall be created :

Regulation 13A of the SEBI (Debenture Trustees) Regulations, 1993 stipulates that no debenture trustee shall act as such for any issue of debentures in case:

(a)it is an associate of the body corporate; or

(b)it has lent and the loan is not yet fully repaid or is proposing to lend money to the body corporate.

Regulation 14 provides that every debenture trustee shall amongst other matters accept the trust deed which contains the matters specified in Schedule IV to the Regulations.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 6(c)(ii) (Old syllabus).

Under Regulation 23 of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 the obligations of the issuer are prescribed which are as follow:

1)The issuer shall treat all applicants to an issue of non-convertible securities in a fair and equitable manner as per the procedures as may be specified by the SEBI.

2)The issuer shall not employ any device, scheme, or artifice to defraud in connection with issue or subscription or distribution of non-convertible securities which are listed or proposed to be listed on the recognized stock exchange.

3)The issuer shall apply for Securities and Exchange Board of India Complaints Redress System (SCORES) authentication in the format specified by the SEBI and shall use the same for all issuance of non-convertible securities.

4)In case of a public issue, the issuer shall provide all required information/ documents to the lead managers for conducting the due diligence, in the form and manner as may be specified by the SEBI.

5)The issuer shall ensure that the secured debt securities are secured by 100% security cover or higher security cover as per the terms of the offer document and/ or Debenture Trust Deed, sufficient to discharge the principal amount and the interest thereon at all times for the issued debt securities.

6)If an issuer is a company, it shall ensure that its Articles of Association require its Board of Directors to appoint the person nominated by the debenture trustee(s) in terms of clause (e) of sub-regulation(1) of regulation 15 of the SEBI (Debenture Trustees) Regulations, 1993 as a director on its Board of Directors.

7)The issuer shall fix a record date for the purposes of payment of interest, dividend and payment of redemption or repayment amount or for such other purposes as specified by the SEBI. Such record date shall be fixed at 15 days prior to the due date of payment interest or dividend, repayment of principal or any other corporate actions.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 3(b) (Syllabus 2022).

Obligations of debenture trustees under Regulation 24 of the SEBI (Issue and Listing of Non-convertible Securities) Regulations, 2021 are as under:

(a)The debenture trustee shall be vested with the requisite powers for protecting the interest of holders of debt securities including a right to appoint a nominee director on the Board of the issuer in consultation with holders of such debt securities and in accordance with applicable law.

(b)The debenture trustees shall supervise the implementation of the conditions regarding creation of security for the debt securities, creation of recovery expense fund and debenture redemption reserve, as applicable.

(c)The debenture trustee shall monitor the security cover in relation to secured debt securities in the manner as specified by the Board.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 6(a) (Syllabus 2022).

Filing of information document while Issuance and Listing of Non-convertible Securities issued on a Private Placement Basis

Regulation 50A of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 provides that an issuer making a private placement of non-convertible securities, and seeking listing thereof on stock exchange(s), shall file a general information document with the stock exchange(s), which shall contain the following disclosures, namely-

(a)disclosures specified in Schedule I of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021,

(b)disclosures specified in the Companies Act, 2013, as applicable, and

(c)additional disclosures as may be specified by the SEBI.

The general information document shall be valid for a period of one year from the date of opening of the first offer of non-convertible securities made under that general information document. In respect of a second or subsequent offer of non-convertible securities, during the period of validity for a period of one year of that general information document, no further general information document shall be required to be filed.

An issuer making a private placement of second or subsequent offer of non-convertible securities, during the validity of the general information document or a shelf prospectus or a shelf placement memorandum, as the case may be, shall file a key information document for each such second or subsequent offer of non-convertible securities, with the stock exchange(s).

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6(b) (Syllabus 2022).

Debenture Trustee’ means a trustee of a trust deed for securing any issue of debentures of a body corporate. The various responsibilities of Debenture trustee as per SEBI (Debenture Trustees) Regulations, 1993 are as follow:

—Call for periodical reports from the body corporate, i.e., issuer of debentures.

—Take possession of trust property in accordance with the provisions of the trust deed.

—Enforce security in the interest of the debenture holders.

—Ensure on a continuous basis that the property charged to the debenture is available and adequate at all times to discharge the interest and principal amount payable in respect of the debentures and that such property is free from any other encumbrances except those which are specifically agreed with the debenture trustee.

—Exercise due diligence to ensure compliance by the body corporate with the provisions of the Companies Act, the listing agreement of the stock exchange or the trust deed.

—To take appropriate measures for protecting the interest of the debenture holders as soon as any breach of the trust deed or law comes to his notice.

—To ascertain that the debentures have been converted or redeemed in accordance with the provisions and conditions under which they are offered to the debenture holders.

—Inform the SEBI immediately of any breach of trust deed or provision of any law.

—Appoint a nominee director on the board of the body corporate when required.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 5(b) (Syllabus 2017).

(i)A debenture trustee cannot act for issue of debentures of an associate.

(ii)Debenture Trustee appointment is compulsory in the following cases:

•Section 71(5) of the Companies Act, 2013, stipulate that no company shall issue a prospectus or make an offer or invitation to the public or to its members exceeding 500 for the subscription of its debentures, unless the company has, before such issue or offer, appointed one or more debenture trustees and the conditions governing the appointment of such trustees shall be such as may be prescribed.

•SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 states that the issuer shall appoint a debenture trustee in case of an issue of debt securities.

•SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, provides that an issuer making an initial public offer of convertible debt instruments shall also appoint at least one debenture trustee in accordance with the provisions of the Companies Act, 2013 and the SEBI (Debenture Trustees) Regulations, 1993.

(iii)Yes, a debenture issue can be transferred. A debenture trustee can relinquish its assignments in respect of the debenture issue of any body corporate only when another debenture trustee is appointed in its place by the body corporate.

(iv)Fees for the initial as well as permanent registration is to be paid by the applicant for Debenture Trustee. The break-up of fee is given below:

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 2(e) (Syllabus 2017).

“Debenture Trustee” means a trustee appointed in respect of any issue of debentures of a body corporate. Debenture Trustee is a liaison between the issuer company and the debenture holders. It acts in a fiduciary capacity for protecting the interest of debenture holders.

Appointment of Debenture Trustee: As per Section 71(5) of the Companies Act, 2013, appointment of debenture trustees is mandatory if a company wants to issue prospectus or make an offer or invitation to public or its members exceeding 500 for the subscription of its debentures. Such appointment must be made before issue of debentures. However, if the debenture issue is proposed to be listed, under the SEBI (Issue and Listing of Non-convertible Securities), 2021, a debenture trustee is required to be appointed for an issue of debentures whether privately placed or for a public issue of debentures.

The company shall appoint debenture trustees, after complying with the following conditions:

•Names of the debenture trustees shall be stated in letter of offer inviting subscription for debentures and also in all the subsequent notices or other communications sent to the debenture holders.

•Before appointment a written consent from the debenture trustee shall be taken and a statement to that effect shall appear in the letter of offer issued for inviting the subscription of the debentures.

•A person shall not be appointed as a debenture trustee, if he-o beneficially holds shares in the company; o is promoter, director or key managerial personnel or any other officer or an employee of the company or its holding, subsidiary or associate company; o is beneficially entitled to moneys which are to be paid by the company otherwise than as remuneration payable to the debenture trustee; o is indebted to the company, or its subsidiary or its holding or associate company or a subsidiary of such holding company; o has furnished any guarantee in respect of the principal debts secured by the debentures or interest thereon; o has any pecuniary relationship with the company amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year; o is relative of any promoter or any person who is in the employment of the company as director or key managerial personnel.

•The Board may fill any casual vacancy in the office of the trustee but while any such vacancy continues, the remaining trustee may act. When such vacancy is caused by the resignation of the debenture trustee, the vacancy shall only be filled with the written consent of the majority of the debenture holders.

•Any debenture trustee may be removed from office before the expiry of his term only if it is approved by the holders of not less than 3/4th (75%) in value of the debentures outstanding, at their meeting. Eligibility for being debenture trustee: The capital adequacy requirement for registration as Debenture Trustee, as specified under the SEBI (Debenture Trustees) Regulations, 1993, shall not be less than the net worth of Rs. 10 crore. Further, as per regulation 7, only following persons are entitled to act as a debenture trustee, after obtaining necessary registration from SEBI:

•A scheduled bank carrying on commercial activity; or

•A public financial institution; or

•An insurance company; or

•Body corporate.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 6A(iii) (Syllabus 2017).

‘Debenture Trustee’ means a trustee appointed in respect of any issue of debentures of a body corporate.

Duties of Debenture Trustee:

It shall be the duty of every debenture trustee to-

o satisfy itself that the prospectus or letter of offer does not contain any matter which is inconsistent with the terms of the issue of debentures or with the trust deed;

o satisfy itself that the covenants in the trust deed are not prejudicial to the interest of the debenture holders;

o call for periodical status/performance reports from the issuer company within 7 days of the relevant board meeting or within 45 days of the respective quarter whichever is earlier;

o communicate promptly to the debenture holders defaults, if any, with regard to payment of interest or redemption of debentures and action taken by the trustee therefor;

o call for reports on the utilization of funds raised by the issue of debentures;

o Take possession of trust property in accordance with the provisions of the trust deed;

o Exercise due diligence to ensure compliance by the body corporate with the provisions of the Companies Act, the listing agreement of the stock exchange or the trust deed

o To take appropriate measures for protecting the interest of the debenture holders as soon as any breach of the trust deed or law comes to his notice.

o To ascertain that the debentures have been converted or redeemed in accordance with the provisions and conditions under which they are offered to the debenture holders.

o Inform the SEBI immediately of any breach of trust deed or provision of any law.

o Appoint a nominee director on the board of the body corporate when required.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 6(b) (Syllabus 2017).

Debenture Trustees

Debenture Trustee means a trustee of a trust deed for securing any issue of debentures of a body corporate debentures bonds and other hybrid instruments in most cases unless otherwise specified, carry securities for the investors unlike in the case of equity and preference shares. It is necessary that the company makes proper arrangements to extend assurances and comply with legal requirements in favor of the investors who are entitled to this type of security.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 6(c)(i) (Old syllabus).

Participants in Electronic book mechanism

1)Arranger, if any, appointed by the issuer, merchant bankers, RBI registered primary dealers or any other registered intermediaries, may act as the arranger. Arranger shall be categorised as a Category 1 Participant who may enter bids on Electronic Book Provider (EBP) either on proprietary basis or for other participants such as High Net Worth Individuals (HNIs), Institutional investors etc.

2)Sub-arranger appointed by the arranger, any broker registered with SEBI may act as a sub-arranger. Sub-arranger shall be categorised as a Category 1 Participant who may enter bids on EBP either on proprietary basis or for other participants such as High Net Worth Individuals (HNIs), Institutional investors etc.

3)Institutional investors shall be categorised as Category 2 Participants who may enter bids on proprietary basis or may participate through an arranger/sub-arranger.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 2(b) (Old syllabus).

“Social Bonds” means a debt security issued for raising funds, subject to the conditions as may be specified by the SEBI from time to time, to be utilized for social project(s) that directly aim to address or mitigate a specific social issue and/or seek to achieve positive social outcomes especially but not exclusively for a target population, falling under any of the following categories:

(a)Affordable basic infrastructure (e.g. clean drinking water, sewers, sanitation, transport, energy)

(b)Access to essential services (e.g. health, education and vocational training, healthcare)

(c)Affordable housing

(d)Employment generation and programmes designed to prevent and/or alleviate unemployment stemming from socioeconomic crises, climate transition projects and/or other considerations for a “just transition” (such provision and/or promotion could include SME financing and microfinance)

(e)Food security and sustainable food systems (e.g. physical, social, and economic access to safe, nutritious, and sufficient food that meets dietary needs and requirements; resilient agricultural practices; reduction of food loss and waste; and improved productivity of small-scale producers)

(f)Socioeconomic advancement and empowerment (e.g. equitable access to and control over assets, services, resources, and opportunities; equitable participation and integration into the market and society, including reduction of income inequality)

(g)any other category, as may be specified by SEBI from time to time.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 3(b) (Syllabus 2022).

Under Chapter VI of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, various conditions to be fulfilled by an issuer of Commercial Papers, to get them listed, are as follows:

i)Issuer desirous of listing of commercial paper shall comply with the conditions as may be specified by the SEBI from time to time,

ii)An issuer that has filed a general information document under these regulations and subsequently intends to issue commercial paper and seeks listing thereof, during the validity period of such general information document, shall file a key information document with the disclosures as may be specified by SEBI,

iii)An issuer that has filed a shelf prospectus in case of public issue under these regulations and subsequently intends to issue Commercial Paper and seeks listing thereof, during the validity period of such shelf prospectus, shall not be required to file a general information document so long as the key information document is filed in accordance with these regulations,

iv)The designated stock exchange shall collect a regulatory fee as specified in the regulations from an issuer of commercial paper at the time of their listing,

v)The issuer shall apply for Securities and Exchange Board of India Complaints Redress System (SCORES) authentication in the format specified by SEBI and shall use the same for issuance and listing of commercial paper.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 3(c) (Syllabus 2022).

“Green debt security” is defined under the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 which means a debt security issued for raising funds subject to the conditions as may be specified by the SEBI from time to time, to be utilised for project(s) and/ or asset(s) falling under any of the following categories:

(i)renewable and sustainable energy including wind, bioenergy, other sources of energy which use clean technology,

(ii)clean transportation including mass/public transportation,

(iii)climate change adaptation including efforts to make infrastructure more resilient to impacts of climate change and information support systems such as climate observation and early warning systems,

(iv)energy efficiency including efficient and green buildings,

(v)sustainable waste management including recycling, waste to energy, efficient disposal of wastage,

(vi)sustainable land use including sustainable forestry and agriculture, afforestation,

(vii)biodiversity conservation,

(viii)pollution prevention and control (including reduction of air emissions, greenhouse gas control, soil remediation, waste prevention, waste reduction, waste recycling and energy efficient or emission efficient waste to energy) and sectors mentioned under the India Cooling Action Plan launched by the Ministry of Environment, Forest and Climate Change,

(ix)circular economy adapted products, production technologies and processes (such as the design and introduction of reusable, recyclable and refurbished materials, components and products, circular tools and services) and/or eco efficient products

(x)blue bonds which comprise of funds raised for sustainable water management including clean water and water recycling, and sustainable maritime sector including sustainable shipping, sustainable fishing, fully traceable sustainable seafood, ocean energy and ocean mapping,

(xi)yellow bonds which comprise of funds raised for solar energy generation and the upstream industries and downstream industries associated with it,

(xii)transition bonds which comprise of funds raised for transitioning to a more sustainable form of operations, in line with India’s Intended Nationally Determined Contributions, and

Explanation: Intended Nationally Determined Contributions (INDCs) refer to the climate targets determined by India under the Paris Agreement at the Conference of Parties 21 in 2015, and at the Conference of Parties 26 in 2021, as revised from time to time.

(xiii)any other category, as may be specified by SEBI from time to time.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6(c) (Syllabus 2022).

Green Debt Security

“Green debt security” means a debt security issued for raising funds subject to the conditions as may be specified by the SEBI from time to time, to be utilised for project(s) and/ or asset(s) falling under any of the following categories:

(i)renewable and sustainable energy including wind, bioenergy, other sources of energy which use clean technology,

(ii)clean transportation including mass/public transportation,

(iii)climate change adaptation including efforts to make infrastructure more resilient to impacts of climate change and information support systems such as climate observation and early warning systems,

(iv)energy efficiency including efficient and green buildings,

(v)sustainable waste management including recycling, waste to energy, efficient disposal of wastage,

(vi)sustainable land use including sustainable forestry and agriculture, afforestation,

(vii)biodiversity conservation,

(viii)pollution prevention and control (including reduction of air emissions, greenhouse gas control, soil remediation, waste prevention, waste reduction, waste recycling and energy efficient or emission efficient waste to energy) and sectors mentioned under the India Cooling Action Plan launched by the Ministry of Environment, Forest and Climate Change,

(ix)circular economy adapted products, production technologies and processes (such as the design and introduction of reusable, recyclable and refurbished materials, components and products, circular tools and services) and/or eco efficient products,

(x)blue bonds which comprise of funds raised for sustainable water management including clean water and water recycling, and sustainable maritime sector including sustainable shipping, sustainable fishing, fully traceable sustainable seafood, ocean energy and ocean mapping,

(xi)yellow bonds which comprise of funds raised for solar energy generation and the upstream industries and downstream industries associated with it,

(xii)transition bonds which comprise of funds raised for transitioning to a more sustainable form of operations, in line with India’s Intended Nationally Determined Contributions, and

Explanation : Intended Nationally Determined Contributions (INDCs) refer to the climate targets determined by India under the Paris Agreement at the Conference of Parties 21 in 2015, and at the Conference of Parties 26 in 2021, as revised from time to time.

(xiii)any other category, as may be specified by the SEBI from time to time.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 6(a) (Syllabus 2022).

A company cannot make any public issue of Non-convertible Redeemable Preference Shares (NCRPS) unless the following conditions are fulfilled:

1.The company shall not make any public issue of NCRPS if as on the date of filing of draft offer document or final offer document as provided :-

–the company or the person in control of the company or its promoter or its director is restrained or prohibited or debarred by SEBI from accessing the securities market or dealing in securities; or

–the company or any of its promoters or directors is a wilful defaulter or it is in default of payment of interest or repayment of principal amount in respect of NCRPS issued by it to the public, if any, for a period of more than 6 months.

2.It has made an application to one or more recognized stock exchanges for listing of such securities therein. If the application is made to more than one recognized stock exchanges, the issuer must choose one of them which has nationwide trading terminals as the designated stock exchange.

3.It has obtained in-principle approval for listing of its non-convertible redeemable preference shares.

4.Credit rating including the unaccepted ratings obtained from more than one credit rating agencies, registered with SEBI shall be disclosed in the offer document

5.The minimum tenure of the NCRPS shares shall not be less than three years.

6.The issue has been assigned a rating of not less than “AA-” or equivalent by a registered credit rating agency.

7.The Company shall create a capital redemption reserve as per Companies Act, 2013.

8.The issuer shall not issue NCRPS for providing loan to or acquisition of shares of any person of the same group other than to subsidiaries of the issuer.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 3(b) (Old syllabus).