In a consultation paper released on Saturday, the market watchdog proposed replacing the word “consent letter” with “debenture trustee agreement” in SEBI’s (Issue and Listing of Non-Convertible Securities) Rules or NCS Rules.
The Debenture Trustee Agreement (DTA), which legally validates the appointment of a debenture trustee, is considered more important by the regulator than the earlier term ‘consent letter’.
This change will help investors take more informed decisions while investing in debentures.
Earlier, a working group noted that the issuer obtains a letter of consent from the debenture trustees before the commencement of the assignment while the DTA is executed between them at a later stage.
However, the letter of consent does not appear to have any legal sanctity, he added. Therefore, the Working Group agreed that the legal document validating the appointment of the Debenture Trustee is the DTA and not the Consent Letter.
Sebi also said, “The debenture trustee agreement will be made accessible to investors using a ‘QR code’ in the offer document.”
This digital access will allow investors to review the agreement, ensure they are fully informed of the trustee’s role and responsibilities and have easy access to critical information.
The Securities and Exchange Board of India (SEBI) has invited public comments and suggestions on the consultation paper till September 6.
The move comes in response to the working group’s recommendations to enhance ease of doing business in the financial sector, which is aligned with the objectives set by the government in the budget for the financial year 2023-24.
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