Choose another country or region to see content specific to your location

Debentures – Complying with stringent norms

September 23, 2021

Amongst multiple debt instruments, debentures are widely used instruments for raising funds.

The key legislation regulating the concept of Issue of Debentures follows Section 71 of the Companies Act, 2013, Rule 18 of the Companies (Share Capital and Debenture) Regulation, 2014, and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The regulatory framework for debt instruments is also governed by multiple regulators through multiple regulations. With respect to listed debentures, stringent provisions have been prescribed by the respective regulators to safeguard investor interest. This is primarily a mechanism to ensure that money invested by the investors in listed debentures is safe and secured against company assets.

Now, action can be taken in case of breach of covenants or terms of issue, disclosure on the website by the debenture trustee, and reporting of regulatory compliance. Hence, adherence to compliance is crucial from the business perspective.

This framework may offer challenges for businesses to raise funds through secured debentures. However, relying on an automation tool can make the compliance process smooth and efficient.

There are more than 35 compliance obligations for companies that issue debentures including non-convertible debentures.

The consequences of non-compliance are steep. Officers and responsible bearers are punishable under multiple sections that include Section 71 (11) of the Companies Act, 2013 as well as Regulation 98 of SEBI Regulations, 2008.

These can include imprisonment and/or fines, directing the persons concerned not to access the securities market for a particular period, suspension of trading, freezing of promoter/promoter group holding of designated securities, restraining the issuer or its promoters or directors from making further issues of securities among other severe penalties.

CompliusĀ® is a simple and easy-to-use SaaS-based comprehensive compliance solution. Leading organizations in the country across sectors are using the tool to reduce the complexity associated with managing compliance obligations as well as optimize resource allocation.

When it comes to compliances with respect to debentures, companies can now eliminate or minimize regulatory surprises and comply as expected of them.

Some leading companies in India depend on There are more than 35 compliance obligations for companies that issue debentures including non-convertible debentures.

The consequences of non-compliance are steep. Officers and responsible bearers are punishable under multiple sections that include Section 71 (11) of the Companies Act, 2013 as well as Regulation 98 of SEBI Regulations, 2008.

These can include imprisonment and/or fines, directing the persons concerned not to access the securities market for a particular period, suspension of trading, freezing of promoter/promoter group holding of designated securities, restraining the issuer or its promoters or directors from making further issues of securities among other severe penalties.

CompliusĀ® is a simple and easy-to-use SaaS-based comprehensive compliance solution. Leading organizations in the country across sectors are using the tool to reduce the complexity associated with managing compliance obligations as well as optimize resource allocation.

When it comes to compliances with respect to debentures, companies can now eliminate or minimize regulatory surprises and comply as expected of them.

Some leading companies in India depend on Complius to manage their compliances.

The author is the CEO of Quant LegalTech Pvt. Ltd.