Debenture Trustees

Registration: A debenture trustee for a trust deed needed for securing any issue of debentures by a company. To act as a debenture trustee, a certificate from the SEBI is necessary. Only scheduled commercial banks, public financial institutions, insurance companies and companies are entitled to act as debenture trustees. While considering the application for registration, the SEBI takes into account, among others, the necessary infrastructure, past experience in matters relevant to a debenture trustee; employment of at least one person with professional qualifications in finance, accounting, law or business management. Further, no person connected with applicant has already been granted similar certificate and any director/ principal officer has not been convicted for any offence involving moral turpitude or found guilty of any economic offence. The initial registration is for a period of three years and is renewable before three months following the expiry of the period of the certificate. The initial registration fee is Rs 2 lakh for the first two years and Rs 11 lakh for third year. The renewal fee is Rs 20,000 every year.

Responsibilities ad Obligations:

Before the issue of debentures for subscription, the consent in writing to the issuing company to act as debenture trustee is obligatory. He has to accept the trust deed which contains matters pertaining to different aspects of the debenture issue.

Duties: The main duties of a debenture trustee include the following:

1. Call for periodic reports from the company.
2. Inspection of books of accounts/records/registration of the company and the trust property to the extent necessary for discharging claims,
3. Take possession of trust property in accordance with the provisions of the trust deed.
4. Enforce security in the interest of the debenture holders.
5. Carry out all necessary acts for the protection of the debenture holders and do all necessary things to resolve their grievances.
6. Ensure refund of money in accordance with the Companies Act and the stock exchange listing agreement dispatch of debenture certificates in accordance with the provisions of the Companies Act; dispatch of interest warrants for interest due on or before due dates and payment of money on the date of redemption of debentures.
7. Exercise due diligence to ascertain the availability of assets of the company by way of security as well as their adequacy/sufficiency to discharge claims when they become due,
8. Exercise due diligence to ensure compliance by the company with the provisions of the Companies Act, stock exchange listing agreement and the trust deed.
9. Take appropriate measures to protect the interest of the debenture holders as soon as any breach of trust deed/law comes to notice.
10. Ascertain the conversion/redemption of debentures in accordance with the provisions/conditions under which they were offered to the holders and
11. Inform the SEBI immediately of any breach of trust deed/provision of law.

In addition, it is also the duty of the trustee to call or ask the company to call a meeting of the debenture holders on a requisition in writing signed by debenture holders, holding at least one tenth of the outstanding amount, or on the happening of an event which amounts to a default or which, in his opinion, affects their interest.

Code of conduct: Every debenture trustee has to abide by the code of conduct specified below>

He has to maintain high standards of integrity, dignity and fairness in discharging his functions and fulfill his obligation in an ethical manner. At all times he should exercise due diligence, ensure proper care and exercise professional judgment. He should also disclose to the issuing company his possible source/potential areas of conflict of duties and interests wile acting as trustee. He should not indulge in any unfair competition harmful to debenture holders/other trustees. Neither should he make any statement, oral or written, to misrepresent the service he is capable of performing for the company or has performed to other companies subject to the secrecy he is expected to keep about the affairs of the company. Finally, he should not make untrue statement /suppress any materials fact in any document/reports/papers or information furnished to the SEBI.