SEBI through its latest circular has strengthened the guidelines for debenture trustees with respect to listed securities. The requirements pertaining to encumbrance, creation of security and related due diligence that needs to be carried out by Debenture Trustees (DTs) have been revised. As per the circular, DTs will have to put in place an empanelment policy for empanelling external agencies for carrying out due diligence and formulate a policy on mitigating conflict of interest and disclose the same on their websites. It further provides that before initiating due diligence, a DT and the listed entity will have to enter into an amended debenture trust agreement with respect to security creation, initial due diligence and continuous monitoring by the DT concerned. Post carrying out the initial due diligence, the DT would have to issue a no-objection certificate to the issuer company for going ahead with proposed change in the structure or creation of security.
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