SEBI widens the scope of the “Green Debt Security”

Notification No. SEBI/LAD-NRO/GN/2023/119, Dated 02.02.2023

The Securities and Exchange Board of India on 02.02.2023 has notified amendment to the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021. As per the amended norms, the term ‘Green debt security shall now include pollution prevention and control and sectors mentioned under the India Cooling Action Plan, blue bonds, which comprise funds raised for sustainable water management, yellow bonds, which comprise funds raised for solar energy generation, etc. Various other changes have also been notified throughout the regulations. The amendment will be effective from 02.02.2023. The key highlights of the present amendments are:

1. Widening the scope of the definition of ‘Green debt security’

The SEBI has widened the scope of the definition of the “Green debt security”. Now, the term “Green debt security” shall also cover debt security issued for raising funds utilised for pollution prevention and control and sectors mentioned under the India Cooling Action Plan, blue bonds, which comprise funds raised for sustainable water management, yellow bonds, which comprise funds raised for solar energy generation, etc.

2. A public issue of debt securities or, NCPS shall now be kept open for a minimum of 3 working days and utpo maximum of 10 working days

The SEBI has introduced new regulation 33A, which sets the minimum and maximum duration for the subscription period of debt securities and non-convertible redeemable preference shares issued to the public. The subscription period must be at least 3 working days and no longer than 10 working days.

Further, in case of a revision in the price band or yield, the issuer shall extend the bidding period disclosed in the offer document for a minimum period of 3 working days. It has also been provided that the overall bidding period shall not exceed the maximum number of days i.e., 10 working days.

Earlier, there was no specified period during which the bidding period for public issue of debt securities or non-convertible redeemable preference shares was to be kept open. The exact bidding period for a particular issue was used to be determined by the issuer. This amendment will bring more clarity to the present regulations.

3. Designated stock exchange shall now collect a regulatory fee from certain issuers

The SEBI has amended regulation 50 by inserting a new sub-regulation 5. Now, the designated stock exchange shall collect a regulatory fee as specified in Schedule VI of the regulations from an issuer of perpetual debt instruments, perpetual non-cumulative preference shares and similar instruments at the time of their listing.

Accordingly, clause 1 of Schedule VI has also been amended, Now, in respect of every draft offer document filed in terms of these regulations, a non-refundable fee of 0.00025% of issue size, subject to the minimum of twenty-five thousand rupees and maximum of fifty lakh rupees, shall be paid to the Board.

4. Notice for recalling or redemption of non-convertible securities shall be sent in soft copy via email to eligible holders

The SEBI, through present notification, has notified the manner of sending a notice regarding the recall or redemption of non-convertible securities, prior to maturity, to all the eligible security holders and the debenture trustees. Earlier, a notice was required to be sent at least twenty-one days before the date from which such right is exercisable and the notice to the eligible holders.

Now, notice for recalling or redemption of non-convertible securities shall be sent in the soft copy form via email to eligible holders who have provided their email address to the listed company or a depository and a hard copy of the notice shall be sent to the eligible holders who have not registered their email address.

5. SEBI takes away the requirement of publishing the notice in an English national daily and Regional daily

The SEBI has done away with the requirement of advertising of the notice sent for recall or redemption of non-convertible securities in an English National daily and Regional daily having wide circulation at the place where the registered office of the issuer is situated.

The issuer now shall only send a copy of such notice to the stock exchange(s) where the non-convertible securities of the issuer are listed, and the stock exchange publish the notice on its website.

6. The trust deed shall now include a clause requiring the issuer to appoint the person designated by the debenture trustee(s)

SEBI has notified an amendment to Regulation 18, whereby a new sub-regulation 6A has been introduced. Now, the trust deed shall contain a provision, mandating the issuer to appoint the person nominated by the debenture trustee(s) as a director on its Board at the earliest and not later than one month from the date of receipt of nomination from the debenture trustee(s).

Accordingly, an amendment has also been made in regulation 23, a new sub-regulation has been inserted. If an issuer is a company, it shall ensure that its Articles of Association require its Board to appoint the person nominated by the debenture trustee as a director.

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