Introduction
The Securities and Exchange Board of India ("SEBI") has amended the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 ("NCS Regulations") by way of the SEBI (Issue and Listing of Non-Convertible Securities) (Amendment) Regulations, 2023 ("NCS Amendment Regulations"). The amendments are effective from February 2, 2023.
Pursuant to the NCS Amendment Regulations, SEBI has (a) expanded the definition of green debt securities, (b) prescribed the manner of service of notices in relation to recall or redemption of non-convertible securities prior to maturity, (c) mandated the amendment to the articles of association ("AoA") of the issuer entity for appointment of a nominee director and required such appointment to be made within 1 (one) month of nomination by the debenture trustee,(d) prescribed the minimum and maximum period of subscription for public issues of debt securities and non[1]convertible preference shares, and (e) prescribed the payment of non-refundable regulatory fees for issuance of perpetual debt instruments, perpetual non-cumulative preference shares and other similar instruments. The key changes introduced by the NCS Amendment Regulations are discussed below.
Key Changes
- Expansion of the definition of 'green debt security'
The definition of 'green debt security' has been widened to also include the debt securities issued for the following purposes:
(a) pollution prevention and control (including reduction of air emissions, greenhouse gas control, soil remediation, waste prevention, reduction and recycling, and energy or emission efficient waste to energy) and sectors specified under the India Cooling Action Plan launched by the Ministry of Environment, Forest and Climate Change;
(b) circular economy adapted products, production technologies and processes (such as the design and introduction of reusable, recyclable and refurbished materials, components and products, circular tools and services) and/or eco efficient products;
(c) blue bonds, i.e., funds raised for sustainable water management including clean water and water recycling, and sustainable maritime sector including sustainable shipping, sustainable fishing, fully traceable sustainable seafood, ocean energy and ocean mapping;
(d) yellow bonds, i.e., funds raised for solar energy generation along with upstream and downstream industries associated with it; and
(e) transition bonds, i.e., funds raised for transitioning to a more sustainable form of operations in line with India's intended climate targets under the Paris Agreement at the CoP 21 in 2015 and at the CoP 26 in 2021, as revised from time to time.
- Serving notice for recall or redemption of non-convertible securities prior to maturity
Issuers of non-convertible securities ("Issuer(s)") are now required to send notice for recall or redemption prior to maturity of non-convertible securities to all eligible holders and the debenture trustee at least 21 (twenty-one) days prior to the date on which such right is exercisable as follows:
(a) a soft copy has to be sent to all eligible holders who have registered their email address either with the Issuer or with any depository; and
(b) a hard copy has to be sent to all eligible holders who have not registered their email address either with the Issuer or with any depository.
Further, Issuers are also required to simultaneously provide a copy of such notice of recall or early redemption to each stock exchange where the non-convertible securities of the Issuer are listed, for dissemination on the website of the stock exchange.
Prior to the NCS Amendment Regulations,
(a) the NCS Regulations were silent on the manner in which such notice of recall or early redemption had to be circulated to eligible holders; and
(b) along with providing a copy of the notice of recall or early redemption to the stock exchange, issuers were also required to make an advertisement in an English daily newspaper and regional daily newspaper having wide circulation at the place where the registered office of the Issuer was situated, indicating the details of the right to recall or redeem and eligibility of holders entitled to avail such right. However, this requirement has now been removed.
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