Debt investment managers indicate that the Securities and Exchange Board of India’s (SEBI) recent amendment, issued on 18th September, updates the 2021 regulations for companies issuing debt securities, primarily debentures. The amendment raises concerns as it requires full board approval each time a company raises debt.

Debt investment managers express concerns that the new amendment may delay debenture funding.

The amendment requires companies to ensure that the board of directors reviews the documents, making them ultimately responsible for the contents.

The previous process, known as the GID-KID method, required companies to file a General Information Document (GID) with exchanges containing board-approved financial details.

Companies would then file a Key Information Document (KID) during favourable market conditions, which included pricing and commercial terms approved by the debenture committee.

Investment bankers find the new rules confusing and are seeking clarification from SEBI. The amendment seems to require a full board review of documents, posing potential challenges.

Investment bankers believe the amendment hinders acting swiftly in favourable market conditions.

In publicly listed companies, the involvement of non-executive and independent directors makes it impractical to convene the full board quickly before issuing a debenture.

Lawyers at Khaitan & Company say the original 2021 regulations aimed to simplify the debt-raising process for companies. This new circular may cause delays by requiring full board approval on short notice.

The amendment was introduced after some Non-Banking Financial Companies (NBFCs) claimed their boards had not approved specific debenture issues, which led to failures in repaying debenture holders.

SEBI aims to ensure board oversight of documents to protect lenders and prevent future claims of unawareness.

Lawyers suggest a middle ground that allows reputable companies to raise funds quickly without needing full board approval, arguing that such approval doesn’t guarantee accountability.

Tired of guessing stocks to trade in daily? Unicorn Signals empowers you with powerful tools like daily stock scans for Intraday, Swing & Investing, Market Predictions and much more. Download the Unicorn Signals app today and take control of your investments!