1. INTRODUCTION
The Securities and Exchange Board of India ("SEBI") on July 6, 2023 has introduced the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) (Second Amendment) Regulations, 2023 ("Amendment Regulations") which have amended the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021 ("NCS Regulations").
2. KEY CHANGES INTRODUCED BY THE AMENDMENT REGULATIONS
Set out below are some of the key changes introduced by the Amendment Regulations.
2.1. Introduction of provisions regarding General Information Document ("GID") and Key Information Document ("KID") for issuers of non-convertible securities ("NCS")
In order to avoid multiplicity of placement memoranda filed for non-convertible securities proposed to be listed by listed entities in the same year as well as reduce the operational costs involved in such documentation, SEBI has introduced the concept of GID and KID to be documented by a listed entity proposing to list NCSs. This is in line with the outcome of SEBI's board meeting dated March 29, 20231 which approved various proposals including the introduction of GID and KID for NCSs proposed to be listed on any recognised stock exchange in India. The compliance for filing of the aforesaid documents is on a "comply or explain basis" until March 31, 2024 and mandatory thereafter. SEBI has further clarified that if an issuer has not complied with the filing of GID and KID, it must provide reasons for noncompliance or partial compliance, along with the steps taken to achieve full compliance.
As a context, the GID shall serve as a comprehensive document incorporating the specified information and disclosures outlined in the new Schedule I of the NCS Regulations, in addition to the disclosures mandated by the Companies Act, 2013. The GID will be submitted to the stock exchange during the initial issuance and will remain valid for one year from the date of filing such GID, governing the issuance during that period.
It is interesting to note that SEBI has now replaced the earlier Schedule I (Disclosures for Public Issue of Debt Securities and Non-Convertible Redeemable Preference Shares) and Schedule II (Disclosures for Private Placement of Non-Convertible Securities) for a common and streamlined Schedule I (Disclosures for Issue of Securities) and therefore aligned the general disclosure requirements for both privately placed and public debt issuances in the domestic market.
For all subsequent issuances during the validity of the GID, an issuer is only required to file a specific KID containing the following particulars: (i) specifics of the offer for the non-convertible securities for which the KID is being issued; (ii) updated financial information if the information in the GID is more than six months old; (iii) disclosure of any material changes in the information provided in the GID; (iv) reporting of significant developments not previously disclosed in the GID, relevant to the offer of non-convertible securities covered by the KID; and (v) in the case of a second or subsequent offer made during the validity of the shelf prospectus without a filed GID, adherence to the disclosure requirements specified in Schedule I for private placement of non-convertible securities.
2.2. Simplifying Public Issue Procedures
Issuers who have previously filed a shelf prospectus for a public issue will benefit from simplified procedures if they later plan to list commercial papers within the validity period of the shelf prospectus. In such instances, the issuer is exempted from filing a separate GID. Instead, they are required to file a KID in accordance with the regulations, ensuring transparency while reducing redundant paperwork.
2.3. Increasing accountability for Senior Management
The Amendment Regulations have added a new definition for senior management who are defined as members of its core management team, excluding the board of directors and includes members one level below the chief executive officer or the managing director ("Senior Management"). Additionally, Schedule I now includes additional disclosure requirements for Senior Management, which encompass the declaration of any financial or material interests held by them.
3. QUICK VIEW
SEBI's recent amendments to the NCS Regulations mark a significant shift towards the streamlining of the disclosure process to be followed by issuers seeking to list non-convertible securities both by way of public issuances and through private placement route. These changes are a welcome step in minimising operational burden and documentation expenses of the issuers and generally aims to promote transparency and enhance investor confidence. As the industry adapts to the new framework governing listing of NCS as announced by the SEBI in its board meeting dated June 29, 2023, it is expected that the above changes shall be a fillip to the overall efficiency and growth of the domestic debt securities market.
Footnote
1. Available here: https://www.sebi.gov.in/media/press-releases/mar-2023/sebi-board-meeting_69552.html
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