SEBI has notified amendments to the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (Debt Regulations), which will come into effect from 13 November 2012. Since the introduction of Debt Regulations in 2008, SEBI has undertaken a series of reforms in order to make regulatory framework for debt markets more robust. However, despite constant regulatory efforts to improve the debt markets, the private placement of debt securities has been highly unregulated. Therefore, SEBI has introduced additional disclosure requirements in the recent amendment with a view to make the regulatory framework for private placement of debt securities more robust, and to align the same with the disclosure requirements that are applicable to public issuance of equity shares.
Some of the major amendments are:
- For regular issues of debt securities through private placement, an enabling clause for a "Shelf Placement Document" with a validity of 180 days has been introduced. Now, a company proposing to undertake a private placement of debt securities can file a Shelf Placement Document containing the disclosures specified in the Debt Regulations with the stock exchange. A company which has filed the Shelf Placement Document will not be required to file an offer document while undertaking a subsequent private placement of debt securities if such issuance is undertaken within a period of 180 days from the date of filing of the Shelf Placement Document. However, the company will need to update the Shelf Placement Document in case of each tranche with the details of the private placement and material changes, if any, in the information provided in the Shelf Placement Document.
Schedule I of the Debt Regulations which sets out the disclosure requirements for the public issuance or private placement of debt securities, now mandates additional disclosures to be made in the offer document/ memorandum and prescribes formats for presenting (i) financial information, (ii) history of equity share capital, and (iii) offer terms. Some of the key changes that have been introduced are:
- The issuer company will now need to provide details of changes in its capital structure, and particulars of all defaults and/or delays in payments of any loans, debt securities and other financial indebtedness (including corporate guarantee) for last five years in order to provide the investor with a greater degree of perspective or insight regarding its financial history.
- Schedule I now provides for certain circumstances in which the issuer company will be required to pay penal interest to the investors.