SEBI proposes merger of debt securities rules into single one

New Delhi: To ease the compliance burden on listed entities, SEBI on Wednesday proposed a merger of listing rules pertaining to debt securities and non-convertible redeemable preference shares into a single regulation.

The proposal is aimed at harmonising with the Companies Act, 2013, and maintaining consistency with the SEBI’s LODR (Listing Obligations and Disclosure Requirements) rules and Debenture Trustees norms, the regulator said in a consultation paper.

The Securities and Exchange Board of India (SEBI) has invited public comments, open for 21 days, on the proposal.
Under the proposal, Sebi has suggested merger of the Issue and Listing of Debt Securities or ILDS norms and the Issue and Listing of Non-Convertible Redeemable Preference Shares or NCRPS Regulations into a single regulation — Issue and Listing of Non-Convertible Securities or NCS Regulations.

Further, NCS rules should also include certain provisions issued through circulars under ILDS and NCRPS norms, Sebi noted.

The rules on ILDS and NCRPS were notified in June 2008 and June 2013, respectively. The ILDS Regulations were enacted for the issuance and listing of debt securities, whereas NCRPS Regulations were enacted for the issuance and listing of non-convertible redeemable preference shares.

Subsequent to the implementation of these two rules, considerable time has passed, Sebi said.

In addition, various changes have taken place in the regulatory landscape, such as amendments to the Companies Act, repeal of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, and substitution with ICDR rule, 2018, SEBI noted.

They also include enhancement of requirements for debenture trustees, and issue of various circulars in relation to the ILDS and NCRPS rules keeping in mind the market dynamics, it added.

The regulator said a need was felt to merge and realign the ILDS and NCRPS regulations to ensure that ease of reference and language and also remove redundancies.

The proposal will simplify and align the regulations in line with the various circulars and guidance issued by Sebi and improve the structure of the regulations in order to enhance readability, the regulator said.

The proposed merger is aimed at identifying policy changes in line with the present market practices and the prevailing regulatory environment and to ease doing business, it added.

In addition, it will separate the chapters on the basis of type of issuance — public or private placement — and instruments — debt securities, commercial papers, so that all relevant information is sorted and are available at one place.  Also, it will merge all the existing circulars into a single operational circular.

Apart from dealing with the listing of non-convertible redeemable preference shares, the current NCRPS rules also cover the listing of perpetual debt instruments (PDIs) and perpetual non-convertible preference shares (PNCPS).

While debt securities are ‘pure play’ debt instruments, NCRPS’ are hybrid equity and debt instruments. They carry a fixed dividend rate as well as are redeemable, and the holder is entitled to voting rights in case dividend is not paid for two years as per the Companies Act and therefore, they are also termed as a ‘quasi-debt’ instruments.
The NCRPS Regulations have been modelled on the ILDS Regulations.