1. SEBI (Issue and Listing of Debt Securities) Regulations, 2008 will be applicable, in case the Company wants to make
(a) public issue of debt securities; and
(b) listing of debt securities issued through public issue or on private placement basis on a recognized stock exchange.
2. ‘Debt securities’ under these regulations means non-convertible debt securities which create or acknowledge indebtedness, and include debenture, bonds and such other securities of a body corporate or any statutory body constituted by virtue of a legislation, whether constituting a charge on the assets of the body corporate or not, but excludes bonds issued by Government or such other bodies as may be specified by the Board, security receipts and securitized debt instruments.
3. The term “private placement” in accordance with the regulations means an offer or invitation to less than fifty persons to subscribe to the debt securities in terms of sub-section (3) of section 67 of the Companies Act, 1956 (1 of 1956); the term “public issue” means an offer or invitation by an issuer to public to subscribe to the debt securities which is not in the nature of a private placement;
4. The Company cannot make any public issue of debt securities if as on the date of filing of draft offer document and final offer document as provided in the regulation, the Company or the person in control of the Company, or its promoter, has been restrained or prohibited or debarred by the Securities and Exchange Board of India (Board) from accessing the securities market or dealing in securities and such direction or order is in force.
5. Call a Board Meeting after giving notice to all the directors of the company as per section 286 to decide about the issue of debentures and the steps to be taken in that regard [Section 292), keeping in view the following matters:
(a) whether the debenture is non-convertible, or fully or partly convertible
(b) if convertible stage(s) and terms of conversion including premium
(c) maturity period of non-convertible/non-convertible portion of partly convertible debenture
(d) rate of interest
(e) whether public/right issue
(f) credit rating
(g) appointment of trustee
(h) appointment of Lead Manager(s) and other intermediaries.
6. Make an application to one or more recognized stock exchanges for listing of such securities before the date of filing of draft offer document and final offer document, provided that where the application is made to more than one recognized stock exchanges, the issuer shall choose one of them as the designated stock exchange, Provided further that where any of such stock exchanges have nationwide trading terminals, the issuer shall choose one of them as the designated stock exchange. A simplified Listing Agreement for debt securities has been put in place.
The Listing Agreement for debt securities as set out at Annexure IV consists of two parts. The first part prescribes only incremental disclosures which are relevant for debt securities of such issuers whose equity shares are listed on the Exchange. The second part, which is applicable to issuers whose equity shares are not listed on the Exchange, prescribes detailed disclosures. During the currency of listing of equity shares, the issuer shall comply with provisions in Part A. In all other cases, the issuer shall comply with provisions in Part B.
7. Before filing of draft offer document, the company should have obtained inprinciple approval for listing of its debt securities on the recognized stock exchanges where the application for listing has been made;
8. Obtain credit rating from at least one credit rating agency registered with the Board and is disclosed in the offer document, if credit ratings are obtained from more than one credit rating agencies, all the ratings, including the unaccepted ratings, shall be disclosed in the offer document.
9. Enter into an arrangement with a depository registered with the Board for dematerialization of the debt securities that are proposed to be issued to the public, in accordance with the Depositories Act,1996 and regulations made there under.
10. In case, the company is a public company or its subsidiary, then obtain the permission of the General Meeting by Ordinary Resolution unless borrowing by issue of debentures is within the borrowing limits already sanctioned under Section 293(l)(d).
11. Also obtain the permission of the General Meeting by Ordinary Resolution under Section 293(l)(a), if the whole or substantially the whole of any of the company's undertaking is proposed to be charged against the debentures by usufructuary mortgage.
12. If Ordinary Resolutions are passed as aforesaid by the company then file them in e-form No. 23 along with the Explanatory Statements with the concerned ROC within thirty days of their passing [Section 192(4] after paying the requisite fee prescribed under Schedule X to the Act.
13. Forward promptly to the Stock Exchange with which the company is enlisted, three copies of the notice and a copy of the proceedings of the General Meeting. [Clause31(c) and (d) of the Listing Agreement].
14. The Company is required to appoint one or more merchant bankers who are duly registered with the Board. One of them should be a lead merchant banker.
15. Obtain consent of the proposed trustees if the debentures are proposed to be issued under a trust deed.
16. The Company should then appoint one or more debenture trustees in accordance with the provisions of Section 117B of the Companies Act, 1956 (1 of 1956) and Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993.
17. Prepare the draft trust deed and get the same approved by your Board authorizing some one to execute the same [Section 117A]
18. Execute the trust deed within 3 months of the date of closure of the issue after proper stamping and get the same registered with the registration authorities of the appropriate State.
19. Note that the debenture issue by the Company is not allowed for providing loan to or acquisition of shares of any person who is part of the same group or who is under the same management. [sub-regulation (5) of Regulation 4]
20. Explanation given under sub regulation (6) of regulation 4 states that (a) two persons shall be deemed to be “part of the same group” if they belong to the same group within the meaning of clause (ef) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) or if they own “inter-connected undertakings” within the meaning of clause (g) of section 2 of that Act;
(b) the expression “under the same management” shall have the meaning derived from sub-section (1B) of section 370 of the Companies Act, 1956 (1 of 1956).
21. In accordance with Regulation 5(1), the offer document must contain all material disclosures which are necessary for the subscribers of the debentures to take an informed investment decision.
22. The Company and the lead merchant banker must ensure that the offer document contains the following:
(a) the disclosures specified in Schedule II of the Companies Act, 1956;
(b) disclosure specified in Schedule I of these regulations;
(c) additional disclosures as may be specified by the Board.
23. In accordance with explanation given under sub regulation (2) of regulation 5, for the purpose of point number ‘21’ above, “material” means anything which is likely to impact an investors’ investment decision.
24. A draft offer document is required to be filed by the Company with the designated stock exchange through the lead merchant banker. [Sub regulation (1) of regulation 6].
25. Public comments are then invited by posting the draft offer document filed with the designated stock exchange on the website of the designated stock exchange for a period of seven working days from the date of filing the draft offer document with such exchange. [Sub regulation (2) of regulation 6].
26. The draft offer document may also be displayed on the website of the issuer, merchant bankers and the stock exchanges where the debt securities are proposed to be listed. [Sub regulation (3) of regulation 6].
27. It should be ensured by the lead merchant banker that the draft offer document clearly specifies the names and contact particulars of the compliance officer of the lead merchant banker and the issuer including the postal and email address, telephone and fax numbers. [Sub regulation (4) of regulation 6]
28. It should be ensured by the Lead Merchant Banker that all comments received on the draft offer document are suitably addressed prior to the filing of the offer document with the Registrar of Companies. [Sub regulation (5) of regulation 6].
29. A copy of draft and final offer document is also required to be forwarded to the Board for its records, simultaneously with filing of these documents with designated stock exchange. [Sub regulation (6) of regulation 6].
30. The lead merchant banker is required to furnish to the Board a due diligence certificate as per Schedule II of the regulations before filing of the offer document with the Registrar of Companies. [Sub regulation (7) of regulation 6]
31. The debenture trustee is also required to furnish to the Board a due diligence certificate as per Schedule III of these regulations, before opening of the public issue.
32. The draft and final offer document would be displayed on the websites of stock exchanges. Also these can be downloaded in PDF / HTML formats. [Sub regulation (1) of regulation 7].
33. The offer document is required to be filed with the designated stock exchange, simultaneously with filing thereof with the Registrar of Companies, for dissemination on its website prior to the opening of the issue. [Sub regulation (2) of Regulation 7]
34. In case, any person makes a request for a physical copy of the offer document, the Company or lead merchant banker should entertain the request and provide the same to him. [Sub regulation (3) of Regulation 7]
35. The Company is required to make a advertisement in an national daily with wide circulation, on or before the issue opening date and such advertisement shall, amongst other things, contain the disclosures as provided in the Schedule IV of the Regulations. [Sub regulation (1) of Regulation 8]
36. Any advertisement issued by the Company should not be misleading in material particular and should not be manipulative or deceptive and should not contain any matters which are extraneous to the contents of the offer document.
37. Every application form issued by the company should accompanied by a copy of the abridged prospectus and such abridged prospectus should not contain matters which are extraneous to the contents of the prospectus. The facility for subscription of application in electronic mode may be provided for by the Company subject to the relevant applicable requirements as may be specified by the Board.
38. The Company may determine the price of debt securities in consultation with the lead merchant banker and the issue may be at fixed price or the price may be determined through book building process in accordance with the procedure as may be specified by the Board. [Regulation 11]
39. In case of a private offer, obtain applications by private negotiations.
40. On receipt of applications, complete proceeding regarding allotment. If the debentures are to be enlisted, get the allotment scheme first approved by the Stock Exchange concerned.
41. In case, the Company has not received the minimum subscription, if decided, all the application moneys received in the public issue is required to be refunded forthwith to the applicants. [Sub-regulation (1) to the Regulation 12]
42. Adequate disclosures regarding underwriting arrangements are required to be disclosed in the offer document, where public issue of debenture securities are underwritten by an underwriter registered with the Board. [Regulation 13]
43. The offer document or abridged prospectus or any advertisement issued by the Company in connection with a public issue of debt securities should not contain any false or misleading statement. Also it should not omit disclosure of any material fact because of which the statements made therein (in light of the circumstances under which they are made) becomes misleading. [Regulation 14].
44. For securing the issue of debenture, a trust deed should be executed by the Company in favour of the debenture trustee within three months of the closure of the issue. Such deed should contain the clauses as may be prescribed under section 117A of the Companies Act, 1956 and those mentioned in Schedule IV of the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993. [Regulation 15]
45. The trust deed should not contain a clause which has the effect of –
(i) limiting or extinguishing the obligations and liabilities of the debenture trustees or the Company in relation to any rights or interests of the investors;
(ii) limiting or restricting or waiving the provisions of the Act, these regulations and circulars or guidelines issued by the Board;
(iii) indemnifying the debenture trustees or the Company for loss or damage caused by their act of negligence or commission or omission
46. The Company should create debenture redemption reserve, for the redemption of the debt securities, in accordance with the provisions of the Companies Act, 1956 and circulars issued by Central Government in this regard. [Regulation 16]
47. The proposal to create a charge or security, if any, in respect of secured debt securities should be disclosed in the offer document along with its implications.
48. The Company is required to give an undertaking in the offer document that the assets on which charge is created are free from any encumbrances and if the assets are already charged to secure a debt, the permissions or consent to create second or pari pasu charge on the assets of the issuer have been obtained from the earlier creditor.
49. File e-Form No. 10 with the concerned ROC. The ROC will issue the certificate of registration which shall be endorsed on every debenture certificate.
50. The issue proceeds should be kept in an escrow account until the documents for creation of security as stated in the offer document, are executed. [Regulation 17]
51. Complete all other proceedings such as issuing letters of allotment, debenture certificates, making entries in various registers, etc., etc.