On 11th April, 2022, Securities and Exchange Board of India issues Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (3rd Amendment) Regulations, 2022. This regulation comes into effect with immediate effect and aims to replace “asset cover” with “security cover” for the listed debt with Securities and Exchange Board of India (SEBI). Asset cover certificate is used to monitor the adequacy of assets charged against the debt obligations of the person issuing it. It is submitted to the Debenture Trustee.
- According to regulation 54, “Asset cover” is the ability of any entity in which it is able to repay debt obligations. It is the extent to which the company’s assets regulate risk management.
- By regulation 3, “Asset cover” is replaced by “security cover” in regulation 54.
- Listed entities are under the obligation to provide documents and certificates. The debt securities are non-convertible and the “asset cover” has to be maintained at cent percent or at a higher rate.
- As per the provisions of regulation 54(2) asset cover certificate and statement of value of pledged securities need to be submitted in quarterly, half-yearly, year-to-date.
- Following are the amendments that are to be incorporated in regulation 54–
- in sub-regulation (1),
- before the words and symbols “listed non-convertible debt securities”, the word “secured” shall be inserted;
- the words “asset cover or higher asset cover” shall be replaced with the word “security cover or higher security cover”;
- after the words “principal amount”, the words “and the interest thereon” shall be inserted;
- in sub-regulation (3), the words “asset cover” shall be replaced with the words “security cover”.
- The listed entities have to forward the documents and intimations to the debenture trustees under regulation 56 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
- “Asset cover” is maintained at hundred percent or higher capacity offer document/ Information Memorandum and/or Debenture Trust Deed.
- In regulation 56(1)(d), the words “asset cover or higher asset cover” is replaced with the words “security cover or higher security cover”.