Clarify NCD norms in new companies law: Sebi asks corporate affairs ministry
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Market regulator Securities and Exchange Board of India (SEBI) has asked the corporate affairs ministry to clarify the applicability of the new companies law on firms with listed non-convertible debt securities or NCDs.
Companies like HDFC, Power FinanceCorporation, Sundaram Finance and Bajaj Finance have listed NCDs on the stock exchanges.
The market watchdog has written to the ministry to assess if Sebi's regulations for such instruments are in sync with the Companies Act of 2013, for which rules are currently being finalised.
There are different provisions under the Sebi regulations regarding issue and listing of debentures that have to be complied with by public and private companies.
However, this will change with the new law that will replace the Companies Act of 1956.
"The ministry is finalising the norms under the new Companies Act and that should bring clarity on a lot of things for Sebi. There might be some changes that have to be made by Sebi," an official aware of the development told ET.
Presently, a listed company issuing convertible debentures need to comply with the provisions of Sebi regulations for the issue and listing of debt instruments issued in 2009, along with provisions of the 1956 Companies Law.
However, if NCDs are to be listed (through private placement or a public issue), Sebi's 2008 regulations on debt instruments kick in along with the companies law. "There is no immediate impact on the companies with listed NCDs, owing to the mismatch between Sebi's regulations and the new Companies Act," said Abhyudaya Agarwal, cofounder, iPleaders, a Delhi-based legal education venture.
"Sebi had already passed regulations governing public issues of non-convertible debentures but the modifications introduced under the new Companies Act make it essential to examine whether the current Sebi framework requires any amendments to ensure consistency with the new act." (Economic Times)
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