SEBI operational framework for transactions in defaulted debt securities post maturity

CS Lalit Rajput | Last updated: 23 June 2020

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The Securities and Exchange Board of India (SEBI) has introduced a new operational framework for trading defaulted debt securities after their maturity or redemption date. This framework, effective from July 1, 2020, aims to provide clarity and structure for market participants dealing with securities where redemption amounts haven't been paid. It outlines specific timelines and activities for issuers, debenture trustees, stock exchanges, and depositories to ensure smoother transactions and information flow.

Securities Exchange Board of India (SEBI) vide Circular no. SEBI/HO/DDHS/CIR/P/103/2020 dated 23rd June, 2020 has came out with Operational framework for transactions in defaulted debt securities post maturity date/ redemption date under provisions of SEBI (Issue and Listing of Debt Securities) Regulations, 2008.

The Circular was issued to:

· All Issuers who have listed their debt securities
· All Recognized Stock Exchanges
· All Depositories
· All Debenture Trustee(s)

SEBI has received various Representations from market participants and investors to allow transactions in debt securities where redemption amount has not been paid on maturity/redemption date (referred as defaulted debt securities) and has decided to introduce an operational framework for transactions in defaulted debt securities Accordingly.

Applicability: The provisions of this circular shall come into force from July 01, 2020.

SEBI Defaulted Debt Securities: Post-Maturity Framework

Outline of the operational framework presented in a tabular form along-with timelines:

	Event	Activity to be undertaken	Timeline (Working Days)	By	To
1.	Execution of Debenture trust deed	Pre-authorization to seek debt redemption payment-related information from issuer’s bank	At the time of execution of the deed	Issuer	Debenture Trustee(s)
2.	Any change in bank details of issuer for making debt redemption payment	Information regarding updated bank details	Within 1 working day of event	Issuer	Debenture Trustee(s)
3.	Creation of ISIN / Listing of Debt Securities	Intimation of Redemption date	-	Issuer	Depositories Stock Exchange(s)
4.	Redemption/ Maturity date (T day)	Non acceptance of trades for reporting/settlement	T-2	Stock Exchange	-
5.		Temporary restriction on transaction in ISIN	T	Depository	-
6.		Intimate Status of payment of debt securities	T+1	Issuer	Stock Exchange(s) Depositories Debenture Trustee(s)
7.	Non receipt of status of payment from Issuer	Independent Assessment of Payment Status	T+2 to T+9	Debenture Trustee(s)	-
8.	Non receipt of status of payment from Issuer	Intimate Status of payment of debt securities	By T+9	Debenture Trustee(s)	Stock Exchange(s) Depositories
9.	Receipt of information regarding full payment	Obligations as per para 9 of Annexure A	T+3/T+11/ event basis, as applicable	Depositories Stock Exchanges
10.	Receipt of information regarding non-payment	Obligations as per para 4-8 of Annexure A	T+3/T+11/ event basis, as applicable	Depositories Stock Exchanges
Continuous assessment of payment
11.	Any development that impacts the status of default of the concerned debt securities (including restructuring of debt securities, IBC proceedings, its repayment, etc.)	Intimate updated Status of payment of debt securities	Within 1 working day of event	Issuer or Debenture Trustee(s)	1. Stock Exchange(s) 2. Depositories
12.	Continuous assessment of Payment	Intimate Status of payment of debt securities	2ndworking day of April every financial year	Issuer	1. Stock Exchange(s) 2. Depositories 3. Debenture Trustee(s)
13.	Non receipt of status of payment from Issuer	Independent Assessment of Payment Status	3rd working day of April – 7th working day of April of every financial year	Debenture Trustee(s)
14.		Intimate Status of payment of debt securities	Within 7working days of April of Every financial year		1. Stock Exchange(s) 2. Depositories

Disclaimer: IN NO EVENT THE AUTHOR SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM OR ARISING OUT OF OR IN CONNECTION WITH THE USE OF THIS INFORMATION.

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About the Author

CS Lalit Rajput

Company Secretary

Company Secretary having 8+ years of post qualification experience in the Compliance Management Services industry by serving Corporates including Listed Companies, Corporate Secretarial Firms and LLP. Have a keen interest in the Corporate Governance and Compliance Management and the soaring craving to learn everyday. A ... Read more

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