Wanting to create a viable market for corporate bonds, the Securities and Exchange Board of India (SEBI) has promulgated Regulations for Issue and Listing of Debt Securities, resulting in a much-simplified regulatory framework for issuance and listing of non-convertible debt securities (excluding bonds issued by Governments) issued by any company, public sector undertaking or statutory corporations.
Whereas the time-consuming requirements of filing of draft offer documents with SEBI have been dispensed with, more vigilant obligations like due diligence, adequate disclosures, and credit ratings are being put in place for ensuring transparency. The Regulations also emphasize on the role and obligations of the debenture trustees, execution of trust deed, creation of security and creation of debenture redemption reserve in accordance with the stipulations of the Companies Act.
The Regulations provide for rationalized disclosure requirements for public issues and flexibility to issuers to structure their instruments and decide on the mode of offering, without diluting the areas of regulatory concern. In case of public issues, while the disclosures specified under Schedule II of the Companies Act, 1956 shall be made, the Regulations require additional disclosures about the issuer and the instrument viz. nature of instruments, rating rationale, face value, issue size, etc.
Going a big step forward, electronic disclosures have been allowed. Additionally option has been given to the issuers to list their debt securities on private placement basis subject to compliance. For a better enforcement of these regulations a rationalized listing agreement for debt securities is also under preparation.
Clearly, “Corporate Governance” has come a long way from the times when it was little more than a fashionable new mantra in corporate conclaves!
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