To protect the interest of debenture holders, markets regulator Sebi on September 29 decided to strengthen the role of a debenture trustee (DT).
The DT would exercise independent due diligence of the assets on which charge is being created, Sebi said in a statement after its board meeting.
Also, they will take required action by convening the meeting of debenture holders for enforcement of security, joining the inter-creditor agreement under the framework specified by the Reserve Bank of India (RBI). In addition, DT would also carry out continuous monitoring of the asset cover, including obtaining mandatory certificate from the statutory auditor on a half-yearly basis.
Further, the issuer company will create a recovery expense fund at the time of issuance of debt securities that may be utilised by DT in the event of default, for taking appropriate legal action to enforce the security. In addition, Sebi has decided to grant exemption from the reverse book building process for delisting of listed subsidiary, when it becomes the wholly-owned subsidiary of the listed parent pursuant to a scheme of arrangement.
To be eligible to take this route, the listed holding company and the listed subsidiary should be in the same line of business. Both the companies should be compliant with the LODR (Listing Obligations and Disclosure Requirements) Regulations specifically, the regulations pertaining to processing of the schemes of arrangement.
To protect the interests of investors in the listed subsidiary, Sebi the votes cast by public shareholders of the listed subsidiary in favour of the proposal will be at least two times the number of votes cast against it in terms of the current delisting regulations. It further said the shares of the listed parent company and the listed subsidiary entity should be listed for at least 3 years. They should not be suspended at the time of taking this route, and the subsidiary should have been a listed subsidiary of the listed holding entity for at least three preceding years, it added.
Also, the board has approved amendments to insider trading norms with respect to the information that needs to be submitted by the informant under the informant mechanism. Under the amendment, a time period of up to three years has been prescribed for reporting violations through the informant mechanism.
In addition, changes have been made to require informants to include specific information such as details of securities, trades by suspect and unpublished price-sensitive information based on which insider trading is alleged. The board approved amendment to alternative investment funds norms, which include definition of "relevant professional qualification" and provide that the qualification and experience criteria of the investment team may be fulfilled individually or collectively by personnel of key investment team of the manager.
Further, the amendment covers the constitution of an investment committee by the manager for approving investment decisions, responsibilities of manager as well as members of such committee.