Regulation 10 - Assignment of debt or receivables - Securities and Exchange Board of India (Issue and Listing of Securitized Debt Instruments and Security Receipts) Regulations, 2008

Assignment of debt or receivables. 10. (1) The originator and the trustee shall ensure in respect of the debt or receivables assigned to the special purpose distinct entity that the following conditions are fulfilled: (a) the debt or receivables generates or is reasonably expected to generate identifiable cash flows for the purpose of servicing the securitised debt instruments in accordance with the scheme; (b) the originator has a valid enforceable interest in the assets and in the cash flow of the assets prior to the securitisation; (c) the debt or receivables is free from any encumbrances or impediments to their free transfer or the transfer of the rights attaching thereto and their transfer does not constitute an event of default or acceleration trigger under any agreement; (d) the necessary regulatory or contractual permissions or consents have been obtained in order to effect the transfer of such debt or receivables from the originator to the special purpose distinct entity; (e) the originator has not done or omitted to do anything which enables any of his debtors to exercise the right of set-off in relation to such assets; (f) the debt or receivables is transferred at a price arrived at through an arms length transaction and solely on commercial considerations; and (g) any representations and warranties made by the originator regarding the debt or receivables are duly adhered to. (2) The special purpose distinct entity and the originator shall take all necessary steps to ensure that the debt or receivables acquired by the special purpose distinct entity are duly assigned in its name and are legally realizable by it. (3) No special purpose distinct entity shall acquire any debt or receivables from any originator which is part of the same group or which is under the same management as the trustee. Explanation: For the purposes of sub-regulation (3), - (a) two persons shall be deemed to be part of the same group if they belong to the same group within the meaning of clause (ef) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) or if they own inter-connected undertakings within the meaning of clause (g) of section 2 of that Act; (b) the expression under the same management shall have the meaning derived from subsection (1B) of section 370 of the Companies Act, 1956 (1 of 1956). (4) The securitisation transaction shall be structured in such a manner so as to minimise the risk of the asset pool being consolidated with the assets of the originator or the sponsor, in the event of insolvency or winding up of either of them. (5) The special purpose distinct entity and its trustees shall ensure that the debt and receivables assigned to it are through a genuine transaction amounting to a true sale and are legally realizable by it and the special purpose distinct entity shall be remote from the risk of bankruptcy, insolvency and winding up of the originator, sponsor and any other entity.