Legislation UpdatesNotifications

The Securities and Exchange Board of India has issued circular dated 13th August 2021 providing the guidelines on issuance of non-convertible debt instruments along with warrants (‘NCDs with Warrants’) in terms of Chapter VI – Qualified Institutions Placement of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

The guidelines introduced vide circular are:

  • Regulation 179 of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 states that in a qualified institutions placement of non-convertible debt instrument along with warrants, an investor can subscribe to the combined offering of non-convertible debt instruments with warrants or to the individual securities, that is, either non-convertible debt instruments or warrants.
  • SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, governs issue and listing of non-convertible securities, on a recognized stock exchange and provides for Electronic Book Provider platform (EBP platform), offering an efficient and transparent price discovery mechanism.
  • Further in order to streamline the procedure of issuance and applicability of EBP platform mechanism on the ‘NCDs portion’, the following has been decided and made applicable for issues wherein the size of NCDs portion is above threshold prescribed under SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, and Circulars issued there under:
  1. EBP platform mechanism shall be mandatory for ‘NCDs portion’ of the issue (for both stapled and segregated offer) and issuer shall be required to comply with the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021,
  2. In the staple product, warrants are attached with NCDs, while in the segregated product, NCDs and warrants can be subscribed separately.
  3. Of the ‘total issue size’ of the issue, at least 40% size shall consist of ‘Warrants portion’. It may be noted that ‘total issue size’ shall mean combined size of NCDs issue and the aggregate size of the warrants portion, including the conversion price of warrants.
  4. The segregated offer of NCDs and stapled offer, both shall be exempted from the requirements as prescribed under the Regulations 175(3), 179(2) (a), 180(1), and 180(2) of the ICDR Regulations, 2018.

 


*Tanvi Singh, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Bombay High Court: A Division Bench of R.D. Dhanuka and V.G. Bisht, JJ., held that the RBI Circulars dated 27th march, 2020 and 23rd may, 2020 with regard to moratorium on repayment of term loans will not apply to Mutual Funds and Debentures.

Petitioner had made a private placement of 650 unlisted redeemable non-convertible debentures of Rs 10,00,000 in the month of March, 2015 with 10.40% XIRR payable at the time of maturity and having redemption date of 8th July, 2020.

Petitioner had made various payments to respondent 1A under the stated agreement. Since March, 2020 in view of the pandemic petitioner committed default in making payment of certain installments to respondent 1A.

Respondent 1A raised demand for making payment of the amount defaulted under the agreement.

On not being able to make the above payment, petitioner filed the present petition impugning the letter by respondent 1 dated 4th June, 2020 along with extension of redemption dated to a date 3 months after the Government allows schools to reopen, subject to the balance/outstanding debenture amount continuing to bear/accrue interest at 10.40% per annum till such extended date.

Decision

Bench observed that the entire petition is based on the reliance placed on the moratoriums dated 27th March, 2020 and 23rd May, 2020 issued by Reserve bank of India.

What does the said circular indicates?

“..it applies to all Commercial Banks, all Primary (Urban) Co-operative Banks, States Co-operative Banks, District Central Co- operative Banks, All India Financial Institutions, All Non-Banking Financial Companies and also deals with terms loans and working capital facilities provided by those entities.”

Thus, in view of the above, it is very clear that the said Circulars will not apply to mutual funds and debentures.

Zee Entertainment Enterprises Limited is a profit making company and is liable to face the consequence of default committed by the petitioner. It is for the petitioner to make an arrangement for the balance amount on the due date which the petitioner has failed.

Hence, present petition is devoid of merits and accordingly disposed of. [Zee Learn Ltd. v. UTI Asset Management Co. Ltd., 2020 SCC OnLine Bom 806 , decided on 13-07-2020]

COVID 19Legislation UpdatesNotifications

Clarification with regard to creation of deposit repayment reserve of 20% under Section 73 (2) (C) of the Companies Act, 2013 and to invest or deposit 15% of amount of debentures under Rule 18 of Companies (Share capital and Debentures) Rules 2014 – COVID-19 — Extension of time-regarding

ln continuation to General Circular No. 11/2020 dated 24th March 2020 and keeping in view the requests received from various stakeholders seeking extension of time for compliance of the subject requirements on account of COVID-19, it has been decided to further extend the time in respect of matters referred to in paras V , Vl of the aforesaid circular, from 30th June 2020 to 30th September 2020.

CIRCULAR


Ministry of Corporate Affairs

[Circular dt. 19-06-2020]