Non-Convertible Debt Securities & Non-Convertible Redeemable Preference Shares

Securities and Exchange Board of India (‘SEBI’) in terms of power conferred under SEBI Act, 1992 notified Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations 2015’) on 2nd September, 2015, whereby it tries to align the present Listing Agreement with the Companies Act, 2013 and they consolidate the scattered requirement under listing agreement for different securities under single piece of regulation. This regulation will be effective from the 90th day of this notification in the Official Gazette i.e. 1st day of December, 2015. The Regulation 23(4) and 31A will be effective with immediate effect.

Date of Publication in Official Gazette: September 2, 2015

Date of Applicability: December 1, 2015

Applicability: The provisions of below given regulations apply only to a listed entity which has listed its ‘Non-convertible Debt Securities’ and ‘[1] Non-Convertible Redeemable Preference Shares’ on a [2] recognized stock exchange.

This regulation also applicable on “Perpetual Debt Instrument” and "Perpetual Non-Cumulative Preference Share” listed by banks.

‘NON – CONVERTIBLE DEBT SECURITIES’ which is ‘debt securities’ as defined under regulation 2(1)(e) of the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008. [Regulation 2(1)(t) of SEBI (LODR) Regulation 2015]

“NON – CONVERTIBLE REDEEMABLE PREFERENCE SHARE” means a preference share which is redeemable in accordance with the provisions of the Companies Act, 1956 (or the Companies Act, 2013) and does not include a preference share which is convertible into or exchangeable with equity shares of the issuer at a later date, with or without the option of the holder. [Regulation 2(1)(k) of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations 2013]

“DEBT SECURITIES” [Regulation 2(1) (e) of SEBI (ILDS) Regulations 2008] means a non-convertible debt securities which create or acknowledge (include)

Debt Security does not include:

Bonds issued by Government or such other bodies as may be specified by the Board, security receipts and securitized debt instruments

All the terms “Indebtedness”, “Bond”, “Debenture”, “Security”, “Perpetual Debt Instrument” and “BANK” define at the end of the article.

Let's Discuss the Regulation

1. 50. INTIMATION TO STOCK EXCHANGE(S):

I. INTEREST Due/ Redemption Due:

The listed entity shall give prior intimation to the stock exchange(s)

Interest Due: At least (11) eleven [3] working days before the date on and from which the interest on debentures and bonds shall be payable.

Redemption Due: At least (11) eleven working days before the date on and from which the redemption amount of redeemable shares or of debentures and bonds shall be payable.

II. Intention to RAISE FUNDS:

The listed entity [4] may give intimation to raise funds to the stock exchange(s) prior to the meeting of board of directors wherein the proposal to raise funds through new non convertible debt securities or non-convertible redeemable preference shares shall be considered.

The listed entity shall give intimation to raise funds to the stock exchange(s) prior to issuance of such securities.

The aforesaid issue may be either through a public issue or on private placement basis.

III. Intention to Issue Non Convertible Debt Security:

The listed entity shall intimate to the stock exchange(s), at least (2) two working days before the meeting of its board of directors, at which the recommendation or declaration of below given matter is proposed to be considered;

· issue of non convertible debt securities, or

· any other matter affecting the rights or

· interests of holders of non convertible debt securities or

· non-convertible redeemable preference shares

Two Working Days: excluding the date of the intimation and date of the meeting.

2. 51. DISCLOSURE OF INFORMATIONS:

The listed entity shall promptly inform the stock exchange(s) of all information having:

· Bearing on the performance/Operation of the listed entity

· Price Sensitive Information OR

· Any action that shall affect payment of interest or dividend of Non-Convertible Preference Shares OR

· Redemption of Non Convertible Debt Securities OR

· Redeemable Preference Shares

Prompt Inform:

·  The expression ‘promptly inform’, shall imply that the stock exchange must be informed as soon as practically possible and without any delay AND

· That the information shall be given first to the stock exchange(s) before providing the same to any third party.

The listed entity that has issued or is issuing non convertible debt securities and/or non-convertible redeemable preference shares shall make disclosures as specified in [5]Part B of Schedule III.

3. 52. FINANCIAL RESULT:

Provision relating to financial result:

The listed entity shall PREPARE and SUBMIT UN-AUDITED or AUDITED financial results on a half yearly basis in the format as specified by the Board within forty five days from the end of the half year to the recognized stock exchange.

Financial Result on a HALF YEARLY basis, in the specified Format, WITHIN 45 days from the end of the half year to the recognized stock exchanged.

Requirement with Respect to Financial Result:

The listed entity shall comply with following requirements with respect to Preparation, Approval, Authentication and Publication of annual and half-yearly financial results:

Limited Review Report:

· Un-audited financial results shall be accompanied by limited review report prepared by the STATUTORY AUDITORS of the Listed Entity or

·  In case of Public Sector Undertakings, Un-audited financial results shall be accompanied by limited review report prepared by any PRACTICING CHARTERED ACCOUNTANT, in the format as specified by the Board:

Note:

No need to file un-audited financial results for the last half year accompanied by limited review report by the auditors, IF Company intimates in advance to the stock exchange(s) that it shall submit to the stock exchange(s) its annual audited results within Sixty Days from the end of the financial year.

[1] DISCLAIMER: For the purpose of this chapter, if the listed entity has listed its non-convertible redeemable preference shares:

(i)The reference to “interest” may also read as dividend;

(ii) The provisions concerning debenture trustees and security creation (or asset cover or charge on assets) shall not be applicable for “non-convertible redeemable preference shares”

[2] As per “The Securities Contracts (Regulation) Act, 1956, “Recognized Stock Exchange [Section 2(f)] means a stock exchange which is for the time being recognized by the Central Government under Section 4 of the Act.

[3] Any day (other than Sunday or legal holiday) on which legal business can be conducted. Whether Saturday is a working day or not depends on the custom or usage of the trade or jurisdiction. Any day other than Sunday or gazette or statutory holiday. (as per businessdictionary.com)

[4] It is on discretion of Listed entity to inform stock either before Board Meeting or after Board meeting in which proposal to raise funds is discussed.

[5] Detailed discussion on Schedule III Part B we will do in separate article. { The listed entity shall promptly inform to the stock exchange(s) expected default in timely payment of interests/preference dividend or redemption or repayment amount, any events such as strikes and lock outs, delay/ default in payment of interest or dividend / principal amount /redemption for a period of more than three months from the due date}.

To read the full article: Click Here