This update has been prepared to set out the key takeaways from the SEBI press release [PR No.52/2020 dated 29 September 2020] which records the decision of the SEBI board meeting held on September 29, 2020 (“SEBI Press Release”). The effective amendments are expected to be issued shortly.

The key take-aways from the SEBI Press Release are as follows:

A. Review of SEBI (Debenture Trustee) Regulations, 1993, SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Listing Obligations and Disclosure Requirements), 2015 with respect to debentures

Debenture trustees will have to exercise independent due diligence of the assets on which charge is being created. Any necessary action to be taken for the interest of debenture-holders will be taken by the debenture trustees in a meeting of debenture-holders. The exact action to be taken by the debenture trustee is not prescribed except that the debenture trustee will have to take the “required action”. The SEBI Press Release indicated that the meeting outcome will be around enforcement of security and joining the inter-creditor agreement.

Debenture trustees will also be required to continuously monitor the asset cover including obtaining mandatory certificates from statutory auditors on a half yearly basis.

The issuer of debentures will have to create a recovery expense fund for utilization by the debenture trustee in events of default (i.e. legal action for security enforcement).

B. Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009

The SEBI Press Release has carved out an exemption from the book building process for delisting for listed subsidiaries of listed parent companies which are being delisted, where it becomes the wholly owned subsidiary of the listed parent pursuant to a scheme of arrangement. To avail this exemption:

  • The votes cast by public shareholders in favour of the proposed delisting shall be at least twice the number of votes cast against it in terms of the SEBI (Delisting of Equity Shares) Regulations, 2009.
  • Both the companies must be in the “same line of business” and comply with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, specifically, Regulations 11, 37 and 94 which pertain to processing of the schemes of arrangement.
  • The shares of both the companies should be listed for at least 3 years and should not be suspended at the time of availing this exemption.
  • The subsidiary should have been a listed subsidiary of the listed holding entity for at least 3 preceding years.

C. Disclosure obligations in relation to forensic audit of listed entities

SEBI has added following disclosure obligations for listed entities in connection with their forensic audits “without any application of materiality”:

  • Disclosure to the concerned stock exchanges about the initiation of forensic audit along with details such as the name of entity initiating the forensic audit and reasons for the same, if available.
  • Disclosure of the final forensic audit report (other than for forensic audit initiated by regulatory/enforcement agencies) along with comments of the management, if any to the concerned stock exchanges.

D. Review of SEBI (Prohibition of Insider Trading) Regulations, 2015

SEBI will amend the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“Insider Trading Regulations”) to include the following:

  • A limitation period of 3 years for reporting violations of the insider trading laws through the informant mechanism.
  • Change in the Form for Informant’s Voluntary Information Disclosure to be submitted to the Board (“Form”) which is prescribed in Schedule D of the Insider Trading Regulations to require informants to include specific information with respect to the alleged violations, such as details of securities, trades by suspect and unpublished price sensitive information based on which insider trading is alleged. The Form is required to be submitted by the informant to SEBI under Regulation 7B of the Insider Trading Regulations.

Apart from this, there are other amendments such as (i) setting up of a limited purpose repo clearing corporation, (ii) amendments to SEBI (Mutual Funds) Regulations, 1996 to introduce a code of conduct for fund managers and dealers of asset management companies and permitting asset management companies to become self-clearing members of recognized clearing corporations, (iii) amendments to SEBI (Alternative Investment Funds) Regulations, 2012 which inter alia includes fulfillment of required “relevant professional qualification” of the investment team individually or collectively and constitution of an investment committee by the investment manager of the alternative investment fund.


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