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Creation of Security in issuance of listed debt securities and ‘due diligence’ by debenture trustee(s) - SEBI - SEBI/HO/MIRSD/CRADT/CIR/P/2020/218

Extract

..... specifies that the type of security (movable, immovable, tangible, intangible etc.) and type of charge (pledge, hypothecation, mortgage etc.) shall be disclosed by the Issuer. 3. Regulation 13 of the DT Regulations stipulates that the debenture trustee shall enter into a written agreement (“debenture trustee agreement”) with the Issuer before the debenture trustee agrees to act as debenture trustee in respect of the said issue of debt securities. 4. In order to enable the debenture trustee to exercise due diligence with respect to creation of security, the Issuer at the time of entering into debenture trustee agreement shall provide the following information/ documents to the debenture trustee(s): 4.1. Details of assets, movable property and immovable property on which charge is proposed to be created including title deeds (original/ certified true copy by issuers/ certified true copy by existing charge holders, as available) or title reports issued by a legal counsel/ advocates, copies of the relevant agreements/ Memorandum of Understanding, copy of evidence of registration with Sub-registrar, Registrar of Companies, Central Registry of Securitization Asset Reconstruct .....

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Creation of Security in issuance of listed debt securities and ‘due diligence’ by debenture trustee(s) - SEBI

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..... security created; (e) Impact on the security in case of restructuring activity of the guarantor; (f) Undertaking by the guarantor that the guarantee shall be disclosed as “contingent liability” in the “notes to accounts” of financial statement of the guarantor; (g) Copy of Board resolution of the guarantor for the guarantee provided in respect of the debt securities of the Issuer; (h) Executed copies of previously entered agreements for providing guarantee to any other person, if any. 4.6. In case securities (equity shares etc.) are being offered as security then a holding statement from the depository participant along-with an undertaking that these securities shall be pledged in favour of debenture trustee(s) in the depository system. 4.7. Details of any other form of security being offered viz. Debt Service Reserve Account etc.; 4.8. Any other information, documents or records required by debenture trustee with regard to creation of security and perfection of security. B. Due diligence by debenture trustee for creation of security 5. Regulation 15(6) of SEBI (Debenture Trustees) Regulations, 1993 (DT Regulations) inter-alia requires debenture trustee, to .....

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Creation of Security in issuance of listed debt securities and ‘due diligence’ by debenture trustee(s) - SEBI

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..... ssue of debt securities. 8. Debenture trustee shall issue ‘due-diligence certificate’ as per format specified in Annexure A to the Issuer subject to the following: 8.1. Information on consents/ permissions required for creation of further charge on assets are adequately disclosed in OD or PPM/ IM. 8.2. All disclosures made in the OD or PPM/ IM with respect to creation of security are in confirmation with the clauses of debenture trustee agreement. 8.3. All covenants proposed to be included in debenture trust deed (including any side letter, accelerated payment clause etc.) are disclosed in OD or PPM/ IM. 9. Debenture trustee(s) shall maintain records and documents pertaining to due diligence exercised for a minimum period of five years from redemption of the debt securities. C. Disclosures in the offer document or private placement memorandum/ information memorandum and filing of OD or PPM/ IM by the Issuer 10. The Issuer, in addition to disclosures made under Schedule I of ILDS Regulations and circulars issued thereunder, shall also disclose the following in the OD or PPM/ IM: 10.1. “Debt securities shall be considered as secured only if the charged asset is regi .....

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Creation of Security in issuance of listed debt securities and ‘due diligence’ by debenture trustee(s) - SEBI

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..... nager Market intermediaries Regulation & Supervision Department Email id: richag@sebi.gov.in Phone: +91-22-26449596 Annexure A FORMAT OF DUE DILIGENCE CERTIFICATE TO BE GIVEN BY THE DEBENTURE TRUSTEE AT THE TIME OF FILING THE DRAFT OFFER DOCUMENT OR PRIVATE PLACEMENT MEMORANDUM/ INFORMATION MEMORANDUM To, Stock Exchange Dear Sir / Madam, SUB.: ISSUE OF ____________________ BY _______________LTD. We, the debenture trustee(s) to the above mentioned forthcoming issue state as follows: 1) We have examined documents pertaining to the said issue and other such relevant documents, reports and certifications. 2) On the basis of such examination and of the discussions with the Issuer, its directors and other officers, other agencies and on independent verification of the various relevant documents, reports and certifications, WE CONFIRM that: a) The Issuer has made adequate provisions for and/or has taken steps to provide for adequate security for the debt securities to be issued. b) The Issuer has obtained the permissions / consents necessary for creating security on the said property(ies). c) The Issuer has made all the relevant disclosures about the security and also its continued ob .....

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Creation of Security in issuance of listed debt securities and ‘due diligence’ by debenture trustee(s) - SEBI

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