The Securities and Exchange Board of India (“SEBI”), based on the recommendations of a working group constituted by SEBI for this purpose, has vide its circular dated August 13, 2021 (“Circular”), notified a platform for ‘Security and Covenant Monitoring System’ (“Monitoring System”) that shall be developed and hosted by depositories. SEBI had earlier vide its circulars dated November 3, 2020 and November 12, 2020, outlined the process of independent ‘due diligence’ by a debenture trustee on assets of an issuer company for the purpose of creation of security and ‘periodical monitoring’ of security so created.
The Monitoring System shall be used for recording and monitoring of security created and monitoring of covenants of non-convertible securities. The Monitoring System shall, inter alia, capture the process of creation of security (such as due diligence, charge creation, etc.), continuous monitoring of covenants by debenture trustees (as applicable), credit rating of the non-convertible securities by the credit rating agencies (“CRAs”), etc.
Further, the Monitoring System shall enable various stakeholders to record information for different aspects such as security creation, interest and redemption payment, and credit rating information.
The Circular specifies the roles and responsibilities of various stakeholders such as the issuer, debenture trustee and CRAs in detail.
The Monitoring System shall come into effect from April 1, 2022.
Please find a copy of the Circular here.
This update has been contributed by Suchita Ambadipudi (Partner) and Smriti Tripathi (Associate).
7A, 7th Floor, Tower C, Max House,
Okhla Industrial Area, Phase 3,
New Delhi – 110020
The rules of the Bar Council of India do not permit advocates to solicit work or advertise in any manner. This website has been created only for informational purposes and is not intended to constitute solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work in any manner. By clicking on 'Agree' below, you acknowledge and confirm the following:
a) there has been no solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
b) you are desirous of obtaining further information about us on your own accord and for your use;
c) no information or material provided on this website is to be construed as a legal opinion and use of this website will not create any lawyer-client relationship;
d) while reasonable care has been taken in ensuring the accuracy of the contents of the website, Argus Partners shall not be responsible for the results of any actions taken on the basis of information provided in this website or for any error or omission in the website; and
e) in cases where the user has any legal issues, the user must seek independent legal advice.