Clarification on monitoring of Interest/ Principal repayment and sharing of such information with Credit Rating Agencies by Debenture Trustees
Summary
This circular clarifies the obligations of Debenture Trustees to monitor interest and principal repayments by issuer companies. It mandates specific timelines for DTs to seek payment status from issuers and share this information with Credit Rating Agencies. The document also outlines disclosure requirements, reporting mechanisms, and potential penalties for suppression of material information.
Text
SEBI (Debenture Trustee) Regulations, 1993 require the Debenture Trustees (DTs) to monitor that the debenture holders have been paid interest/ principal by the issuer companies on or before the due dates... Further, the DTs are also required to share information available with them regarding client companies, with registered Credit Rating Agencies (CRAs)
The DTs shall, at least 7 days prior to the due date of interest/ principal payment, seek ISIN-wise information from issuer companies under intimation to CRAs advising them to confirm the status of payment of interest/ principal on or before the due date.
If the issuer company confirms the status of payment or where no information is received from the issuer company on or before the due date, the DTs shall accordingly provide ISIN-wise information to the CRAs latest by one day after such due date which shall state the following: a) Information about payment made on or before the due date or; b) Information about delay/ default in payment or; c) No information forthcoming from the issuer company on the payment status.
In cases where the CRAs have been informed as per point no. 2(ii) above that no information is forthcoming from the issuer company on the payment status, the DTs shall update the payment status to CRAs as and when any such information is available with the DTs.
In addition to above, it is reiterated that the DTs shall also ascertain the status of payment by the Issuer Company on the due dates from various sources available at their disposal which, inter alia, include the websites of stock exchange & Issuer Company, debenture holders and quarterly reports submitted by Issuer Companies.
In this regard, it is clarified that the DTs in their communication to the Issuer Companies as mentioned in point no. 2(i) above shall inform them that non-furnishing of information regarding status of payment by due date or non-disclosure of information with respect to timely payment by them on stock exchange website may be considered as suppression of material information and may attract provisions of Section 12A of the Securities and Exchange Board of India Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.
It is clarified that if no information regarding payment by Issuer Company is received by the DTs by due date or such information is not disclosed by the issuer company on the stock exchange website, then, the DTs shall make reference to SEBI accordingly and disclose the non-availability of such information on their website. It is further clarified that failure to make such reference to SEBI in this regard and non-disclosure on its website shall be considered as aiding and abetting the issuer company in suppression of material information and may attract provisions of Section 12A of the Securities and Exchange Board of India Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.
In order to make the quarterly reports by the issuer companies available to the DTs on timely basis, it is clarified that the DTs shall call for periodical status/ performance reports from the issuer company within 7 days of the relevant board meeting or within 45 days of the respective quarter whichever is earlier.
In terms of SEBI Circular MIRSD/DPS III//Cir- 11/07 dated August 6, 2007, the DTs shall disclose the information to the investors and the general public by issuing a press release regarding default by Issuer Company to pay interest on debentures or redemption amount, failure to create a charge on the assets and revision of rating assigned to the debentures. Further, such information shall also be placed on the website of the DT, the issuer company and the stock exchanges. It is clarified that such actions shall be taken by the DT promptly and in any case not later than next day of the occurrence of such events.
The Stock Exchanges are advised to disclose the information submitted by the DTs as mentioned in point no. 7 above immediately on its website on receipt of such information from the DTs.
The DTs shall report compliance of the provisions of this circular in the Half Yearly Report which are required to be submitted by them to SEBI as per Circular CIR/MIRSD/25/2011 dated December 19, 2011.
Source: SecMarx — Clarification on monitoring of Interest/ Principal repayment and sharing of such information with Credit Rating Agencies by Debenture Trustees. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.