[Key Takeaways] SEBI (Issue and Listing of Non-Convertible Securities) (Amendment) Regulations, 2022

SEBI vide Notification No. SEBI/LAD-NRO/GN/2022/77, Dated: 11-04-2022 has notified the SEBI (Issue and Listing of Non-Convertible Securities) (Amendment) Regulations, 2022. The key amendments include a) maintenance of 100% coverage by listed entities, b) furnishing of separate due diligence certificate, c) disclosures for creation of charge in the debenture trust deed, and d) insertion of new schedule IVA. The amended regulations are discussed in detail hereunder:

1. Amendment to Regulation 23 – Issuer to ensure 100% security cover or higher

The amended regulation requires an issuer to 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 interest.

As per extant norms, the issuer is required to ensure that the secured debt securities are secured by 100% security cover.

Comments

As per Regulation 54 of SEBI (LODR) Regulations, 2015, a listed entity is required to ensure 100% asset cover in respect of non-convertible debt securities which can be secured or unsecured. Now, the amended regulation is restricted to only secured debt securities and to 100% security cover.

2. Amendment to Regulation 38 – lead manager to ensure 100% security cover or higher

The amended regulation requires the lead manager to 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 interest.

As per extant norms, the lead manager is required to ensure that the secured debt securities are secured by 100% security cover.

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