Regulatory Insights

(1)

1 PwC pwc.in

7 February 2023

SEBI notifies amended regulations for issue and listing of non-convertible securities

In brief

The Securities and Exchange Board of India (SEBI) notified¹ the SEBI (Issue and Listing of Non-Convertible Securities) (Amendment) Regulations, 2023 (Amended Regulations) amending the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (SEBI NCS Regulations).

By way of this amendment, SEBI has streamlined the process of appointment of a director nominated by the debenture trustee(s) in case of default, prescribed the time for which public issues may be kept open among other miscellaneous changes and has widened the definition of ‘Green Debt Security’ as specified under the SEBI NCS Regulations.

The amendments are effective from 2 February 2023.

In detail

The key amendments are summarised below.

Regulations Summary of amendments

Regulation 2 (1)(q) (Definition of Green Debt Security)

SEBI has widened the definition of Green Debt Security to align it with the Green Bond Principles (published by the International Capital Market Association which are also recognised by the International Organisation of Securities Commissions.

The issuer of such security can now raise funds and utilise them for project(s) and/ or asset(s) covered under pollution prevention and control; sectors included under the India Cooling Action Plan launched by the Ministry of Environment, Forest, and Climate Change; circular economy–adapted products; production technologies and processes, eco-efficient products; blue bonds; yellow bonds and transition bonds.

1 Notification No. SEBI/LAD-NRO/GN/2023/119 dated 2 February 2023

(2)

2 PwC Regulatory Insights

You may ref er to the Amended Regulations f or the detailed list of categories.

Regulations 15 (6) and (7) (Right to recall or redeem prior to maturity)

The requirement to publish a notice of recall or redemption prior to maturity in accordance with the SEBI NCS Regulations by way of an advertisement in the newspapers has been removed.

The amendment has now specified that the notices of recall or redemption under the regulation can now be sent via sof t copy to the registered email id (with the listed entity or with any depository) of the eligible holders or through hard copy where email addresses of the holders are not registered with the entity or any depository.

SEBI, by way of the amendment, intends to alleviate the cost burden on the issuers in cases where there is no significant benefit to the investors.

Regulation 18 (6A) (Trust deed) and Regulation 23 (Obligations of the issuer)

SEBI has amended the regulation to provide a regulatory mandate and has prescribed the time limit for the issuer company to appoint a director nominated by the debenture trustee in cases of default in payment of interest, creation of security or redemption of debentures as s pecified under Regulation 15 of the SEBI (Debenture Trustees) Regulations, 1993 (Debenture Regulations).

According to the amendment, the issuer company is now required to appoint the director nominated by the debenture trustee on its board of directors at the earliest and not later than one month f rom the date of receipt of nomination from the debenture trustee.

In addition, any issuer company intending to issue any debt security under this regulation is required to ensure that its Articles of Association include a clause requiring its Board of Directors to appoint the director nominated by the debenture trustee.

In case of those companies that are already listed as on the date of the Amended Regulations, they are required to amend their Articles of Association on or before 30 September 2023.

The above changes are being made to include a regulatory mandate and a prescribed timeline f or the issuer to appoint such directors nominated by the debenture trustees as there are instances of delays by the issuers.

Regulation 33A (Period of subscription) – Newly inserted

SEBI has prescribed the period of subscription for a public issue to be minimum of three working days and a maximum of ten working days in case of issuance of debt securities under the regulation. The period is in line with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (SEBI ICDR).

Moreover, in case of revision in the price band or yield, the issuer will extend the bidding period for a minimum of three working days subject to the overall bidding period not exceeding ten days.

Additionally, in case of f orce majeure, banking strike or similar circumstances, the bidding period can be extended in the offer documents subject to the overall bidding period not exceeding ten days.

(3)

3 PwC Regulatory Insights

Prior to the amendment, there were no provisions with respect to the duration f or which a public issue of securities under the SEBI NCS Regulations could be open. To curb any inefficiency and delays in the listing process, SEBI has inserted the said provisions.

The takeaways

The amendments are aimed at streamlining SEBI NCS Regulations, specifically in terms of prescribing clear timelines in respect of subscription periods and bidding periods and the appointment of directors nominated by the debenture trustees to further safeguard the interests of the security holders with the provisions contained under the Debenture Regulations and the SEBI ICDR, to the extent amended.

Moreover, the additional inclusions in the definition of ‘Green Debt Security’ are being made in alignment with India’s vision to move towards a greener economy and achieve sustainable development goals.

(4)

pwc.in

In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity.

Regulatory Insights

About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 156 countries with over 295,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

PwC ref ers to the PwC network and/or one or more of its member f irms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

Follow us on

Facebook, LinkedIn, Twitter and YouTube.