Appointment of Director nominated by the Debenture Trustee on boards of issuers
Summary
This circular addresses the appointment of nominee directors on the boards of issuers who are not companies under the Companies Act, 2013. It provides an alternative mechanism for such issuers to comply with Regulation 23(6) of the NCS Regulations by designating existing governing body members as nominee directors. Debenture Trustees are mandated to monitor and ensure compliance with these provisions.
Text
Regulation 23(6) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 obligates an issuer which is a company under the Companies Act, 2013 to ensure that its Articles of Association requires its Board of Directors to appoint as director, the person nominated by the debenture trustee(s).
Issuers that are incorporated under different statutes / are also under the purview of other regulators have expressed inability to execute such amendments as the composition of their boards is governed by certain statutes which do not provide for appointment of nominee directors by Trustees.
Appointment of any director on the boards of certain issuers which are governed by certain statutes requires prior approval of the President of India.
Certain issuers are unable to appoint Nominee Directors on their boards as their principal document / charter does not provide for the same; in a few cases, the absence of a statutory mandate fetters them from amending their principal document.
Issuers falling under categories 2.1, 2.2 or 2.3 shall submit an undertaking to their Debenture Trustees that in case of events mentioned in Regulation 15(1)(e) of SEBI (Debenture Trustees) Regulations, 1993, a non-executive / independent director / trustee / member of its governing body shall be designated as nominee director for the purposes of Regulation 23(6) of NCS Regulations.
Debenture Trustees shall ensure compliance with the provisions of this circular.
Debenture Trustees shall monitor and ensure compliance by issuers, with the provisions of this circular.
The circular shall come into force with immediate effect.
This circular is issued in exercise of the powers conferred upon SEBI under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation 2A of the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993 and regulations 55 and 56 of the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
Source: SecMarx — Appointment of Director nominated by the Debenture Trustee on boards of issuers. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.