Contribution by Issuers of listed or proposed to be listed debt securities towards creation of “Recovery Expense Fund"”

Last updated: 23 October 2020

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The Securities and Exchange Board of India (SEBI) has introduced a 'Recovery Expense Fund' (REF) for listed or proposed to be listed debt securities. This fund aims to enable Debenture Trustees to take prompt action in case of default. Issuers must contribute 0.01% of the issue size, capped at Rs. 25 lakhs, to the Designated Stock Exchange. The fund will be used for expenses related to enforcing security upon default, with any remaining balance refunded to the issuer upon full repayment of debt.

Securities and Exchange Broad of India SEBI/HO/MIRSD/CRADT/CIR/P/2020/207 October 22, 2020 To All issuers who have listed or propose to list their debt securities All Recognized Stock Exchanges All Debenture Trustees registered with SEBI Dear Sir/ Madam, Sub: Contribution by Issuers of listed or proposed to be listed debt securities towards creation of Recovery Expense Fund 1. In order to enable the Debenture Trustee(s) to take prompt action for enforcement of security in

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FAQ :

The REF is created to enable Debenture Trustees to take prompt action for enforcing security in the event of a default on listed debt securities.

Issuers proposing to list debt securities must deposit an amount equal to 0.01% of the issue size, up to a maximum of Rs. 25 lakhs per issuer, towards the REF with the Designated Stock Exchange.

The fund can be used for expenses incurred by the Debenture Trustee towards legal costs, hosting meetings, and other costs related to enforcing security in case of a default.

The balance in the REF will be refunded to the issuer upon repayment of debt securities on their maturity or at the time of exercising call or put options, provided there is no default on any other listed debt securities.

The provisions of this circular come into force from January 01, 2021. Existing issuers have an additional 90 days to comply with the creation of the REF.

Notification No : SEBI/HO/MIRSD/CRADT/CIR/P/2020/207
Source : https://www.sebi.gov.in/legal/circulars/oct-2020/contribution-by-issuers-of-listed-or-proposed-to-be-listed-debt-securities-towards-creation-of-recovery-expense-fund-_47939.html

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