Sebi clarifies in respect of compliance with rules by first-time issuers of debt securities

Capital markets regulator Sebi on Thursday provided clarity to first -time issuers, who are in the process of preparing for their first listed debt securities, with regards to compliance with rules pertaining to Articles of Association (AoA).

This comes after Sebi received representations from first-time issuers, who are in the process of preparing for their first listed privately placed or public issue of NCDs.

Such issuers requested the regulator to provide a time frame, as already given to listed issuers, to amend their AoA since to give effect to the amendments requires formalities like approval from shareholders and conducting board and general meetings.

They also told the regulator that due to the imminent financial year end, there is a spree of borrowing or fund raising activities and the new requirement will dissuade many issuers from approaching the market.

In view of the difficulties posed to first-time issuers, Sebi has asked stock exchanges to take an undertaking from such issuers that they will ensure that their AoA are amended within a period of six months from the date of the listing of the debt securities.

This undertaking can be obtained at the time of granting the in-principle approval. The issuer will have to, within such time, comply and report compliance to stock exchanges changes, which would periodically monitor and remind such issuers on doing the needful.

The new guidelines would come into force with immediate effect, the Securities and Exchange Board of India (Sebi) said in a circular.

The Sebi NCS (Issue and Listing of Non-Convertible Securities) norms requires the Articles of Association (AoA) of an issuer that is a company to include provisions with respect to the requirement for the board of directors to appoint such person nominated by the debenture trustee.

The regulation provides a time period of up to September 30, 2023 for existing debt listed issuers to amend their AoA.