On 04-08-2022, the Securities and Exchange Board of India (‘SEBI’) issued enhanced guidelines for debenture trustees and listed issuer companies on security creation and initial due diligence to protect the interest of investors in securities and to promote the development of and to regulate the securities market.

This circular is applicable to the issuers who have listed and/or propose to list Non- Convertible Securities, Securitized Debt Instruments, Security Receipts, Municipal Debt Securities or Commercial Paper, recognized Stock Exchanges, depositors, Debenture Trustees (‘DT’) registered with SEBI; Credit Rating Agencies registered with SEBI.


  1. A DT and listed entity should enter into an amended debenture trust agreement before initializing due diligence to incorporate the obligations prescribed in:

    • SEBI circular dated 03-11-2020, in para 4 to 7;

    • SEBI circular dated 12-11-2020;

    • SEBI circular dated 19-05-2022.

  2. According to para 4 to 7 of Circular dated 03-11-2020, the DT should issue a No-Objection Certificate (‘NOC’) to the issuer company for going ahead with proposed change in the structure of security. The DT should carry out due diligence for change/ creation/ addition in security.

  3. The issuer company then needs to create the proposed security and charge it in favour of the DT and then get it registered with the sub- registrar, Registrar of Companies, Central Registry of Securitization Asset Reconstruction and Security Interest of India (‘CERSAI’), Depository, within 30 days of creation of charge.

  4. After execution of amended debenture trust deed, the issuer company has to submit the following to the Depositories and Stock Exchanges:

    • NOC by DT for change in security or creation of security;

    • Executed amended debenture trust deed;

    • An undertaking from the DT- stating that the security has been created and registered.

    • Other documents/ consent required as per Regulation 59 of SEBI Listing Obligations and Disclosure Requirements (‘LODR’)

  5. The Depository then should assign a new ISIN of debt securities and also share the same with the recognized Stock Exchanges.

    1. Due Diligence Certificate in case of Shelf Prospectus/ Memorandum:

      DT should undertake due diligence when the security details have not been finalized at the time of filling out the draft prospectus by:

      • Furnish a certificate, confirming that due diligence has been carried out for the clauses other than that related to security creation prescribed in Regulations 40(a) and 44(3) of the SEBI (Issue and Listing of Non- Convertible Securities Regulations) (‘NCS’), 2021

      • DT, at the time of the issuance of the tranche memorandum, where the issue structure including terms related to security had been determined and finalized, should issue a due diligence certificate covering aspects of Regulations 40(a) and 44(3) of the NCS Regulations.

    2. Empanelment of External Agencies by DTs:

      DTs can also impanel external agencies for carrying out due diligence according to the SEBI circular dated 03-11-2020 on the creation of security in the issuance of listed debt securities and due diligence by debenture trustees and according to the SEBI circular dated 12-11-2020 on monitoring and disclosures by DTs. DTs should:

      1. Adopt criteria as approved by their Board of Directors and also disclose the same on their website.

      2. Formulate a policy on mitigating conflict of interest and shall disclose the same on their website.

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