SEBI has issued a Master Circular for Debenture Trustees on July 06, 2023 to replace all previous circulars issued to debenture trustees. The provisions of the Master Circular shall come into force with effect from April 01, 2023, unless specifically mentioned otherwise in the circular.
As per the master circular, Debenture Trustee, by itself or through professionals appointed and compensated/ remunerated by the Debenture Trustee viz., practicing chartered accountant, practicing company secretary, registered valuer, or legal counsel shall independently carry out due diligence. The terms and conditions with respect to exercising due diligence shall also be included in the debenture trustee agreement. The due diligence to be exercised by Debenture Trustee with respect to creation of security shall inter-alia include the following:
- Debenture Trustee shall verify that the assets provided by Issuer for creation of security are free from any encumbrances or necessary permissions or consents has been obtained from existing charge holders by carrying out the following checks:
- Verify from Registrar of Companies, Sub-registrar, CERSAI, IU or other sources where charge is registered/ disclosed as per terms.
- In case of conditional consent/ permission received as per para 2.1(c)(ii) above: (A)Verify whether such conditional consent/ permission given to Issuer by existing charge holders is valid as per terms of transaction documents; and (B)Intimate existing charge holders through necessary and appropriate means (including via e-mail) about the proposal to create further charge on assets by Issuer seeking their comments/ objections, if any, to be communicated to the Debenture Trustee within next five working days.