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SEBI INTERMEDIARIES - DEBENTURE TRUSTEE |
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SEBI INTERMEDIARIES - DEBENTURE TRUSTEE |
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Debenture Section 2(30) of the Companies Act, 2013 defines the term ‘debenture’ as including debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not. The following are not treated as debenture-
Debenture trustee Regulation 2(bb) defines the expression ‘debenture trustee’ as a trustee appointed in respect of any issue of debentures of a body corporate. The debenture trustee is appointed to present and protect the interest of debenture/bond holders. Eligibility for debenture trustee The following are eligible to act as debenture trustee-
Capital requirement The capital requirement for the Debenture Trustee shall not be less than the net worth of Rs. 10 crores. Procedure for obtaining registration An application by a debenture trustee for grant of a certificate registration shall be made to the Board in Form A. The Form A contains 2 parts. Part I of the form requires furnishing the following-
Part II of the form requires furnishing the following-
The application shall be accompanied by a fee of Rs.50,000/-. The Board may require the applicant to furnish further information or clarification regarding matters which are relevant to a debenture trustee to consider the application for a grant of a certificate. The applicant or, its principal officer shall, if so required, appear before the Board for personal representation. While considering the application for registration of Debenture Trustee the Board shall take into the following for its consideration as to whether the applicant-
If the application is complete in all respects and confirmed to the instructions the Board shall grant a certificate of registration in Form B. A debenture trustee who has been granted a certificate of registration shall pay fee of Rs.20 lakhs. The debenture trustee to keep its registration in force, shall pay fee of 9 lakhs every 3 years from the 6th year, from the date of grant of certificate of registration or from the date of grant of certificate of initial registration granted prior to the commencement of the Securities and Exchange Board of India (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016 i.e., 08.12.2016. The Board may, on sufficient cause being shown, permit the debenture trustee to pay such fees at any time before the expiry of six months from the date on which such fees become due. Conditions for registration The registration granted to a debenture trustee is subject to the following conditions-
Rejection of the application Where an application for grant of a certificate of does not fulfill the requirements set out, the Board shall reject the application after giving an opportunity of being heard. The refusal to grant registration shall be communicated by the Board within 30 days of such refusal to the applicant stating therein the grounds on which the application has been rejected. Any applicant may, being aggrieved by the decision of the Board apply within a period of 30 days from the date of receipt of such intimation, to the Board for, reconsideration of its decision. On receipt of the application, the Board shall reconsider its decision and communicate its findings thereon as soon as possible in writing to the applicant. Debenture trustee not act for an associate A person shall not be appointed as a debenture trustee, in case-
Obligation of Debenture Trustee The Debenture Trustee shall enter into an agreement with the body corporate before opening the subscription list for the issue of debentures. Such agreement shall contain-
Every debenture trustee shall accept the trust deeds which shall contain the matters as specified in section 71 of Companies Act, 2013 and Form No. SH.12 specified under the Companies (Share Capital and Debentures) Rules, 2014. Such trust deed shall consist of two parts:
Dispute resolution All claims, differences or disputes between a debenture trustee and a body corporate arising out of or in relation to the activities of the debenture trustee in the securities market shall be submitted to a resolution mechanism that includes mediation and/or conciliation and/or arbitration, in accordance with the procedure specified by the Board. No loss or damage or expenses incurred by the debenture trustee or the body corporate which has appointed the debenture trustee shall be met out of the trust property. Grievance redressal mechanism The debenture trustee shall redress investor grievances promptly within 21 calendar days from the date of receipt of the grievance and in such manner as may be specified by the Board. The Board may also recognize a body corporate for handling and monitoring the process of grievance redressal within such time and in such manner as may be specified. Duties of Debenture Trustee The Debenture Trustee shall perform the following functions-
Maintenance of records Every debenture trustee shall keep and maintain proper books of account, records and documents, relating to the trusteeship functions for a period of not less than five financial years from the date of redemption of debentures. It shall intimate to the Board, the place where the books of account, records and documents are maintained. Compliance Officer A debenture trustee shall appoint a compliance officer. He shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions, etc., issued by the Board or the Central Government and for redressal of investors’ grievances. The compliance officer shall report any non-compliance, of the requirements specified in the listing agreement with respect to debenture issues and debenture holders, by the body corporate to the Board. Inspection The Board is having right to inspect the books of Account and records of the Debenture Trustee for which the Board may appoint inspectors. The Board is also having right to investigate the affairs of the Debenture Trustee either by suo motu or on the basis of complaint received by it. The Board shall give a reasonable notice for the inspection. The Debenture Trustee and its officer shall allow the inspecting authorities to cause inspection. They have to extend all co-operations to the Inspecting authorities. The inspecting authority shall submit the report to the Board. The Board on receipt of report may take action as may deem fit. Auditor The Board may appoint a qualified auditor to investigate into the records of, or the affairs of, the debenture trustee. The auditor so appointed shall have the same powers of the inspecting authority. Liability for default A Debenture Trustee which-
shall be dealt with in the manner provided under the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.
By: Mr. M. GOVINDARAJAN - October 11, 2023
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