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TMI BlogSecurity and Covenant Monitoring’ using Distributed Ledger TechnologyX X X X Extracts X X X X X X X X Extracts X X X X ..... ovenants of the non-convertible securities, a working group comprising of officials from SEBI, Depositories, Stock Exchanges and Trustees Association of India (TAI) was constituted by SEBI. Based on the recommendations of the working group, a platform for 'Security and Covenant Monitoring System' ('system') hosted by Depositories shall be developed. 3. The system shall be used for recording and monitoring of the security created and monitoring of covenants of non-convertible securities. The system shall inter alia capture the process of creation of security (viz. due diligence, charge creation etc.), continuous monitoring of covenants by Debenture Trustees (as applicable), credit rating of the non-convertible securities by the Credit Rating Agencies (CRAs) etc. 4. Depositories shall create, host, maintain and disseminate the system for security and covenant monitoring using distributed ledger technology. Further, the depositories shall: 4.1. Provide secure login credentials to Issuers, CRAs, debenture trustees (DTs) etc. for recording and verifying requisite information on the system. 4.2. Put in place adequate safeguards to ensure the integrity and security of the data on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be recorded in the system pursuant to validation/ verification by DT(s) in terms of SEBI Circular dated November 03, 2020 or any other relevant circulars. 6.3. In case, the value and details of assets recorded are not in line with the terms of proposed non-convertible securities issuance, DT shall not validate and reject the same on the system while providing remarks on same. The system shall send an intimation to the Issuer to rectify any discrepancy or record additional details regarding assets offered as security before initiating issuance of temporary ISIN/ ISIN. 6.4. DTs shall also upload the reports prepared by itself or its appointed agencies viz. valuation report, ROC search report, title search report/ appraisal report, security cover certificate, due diligence certificate as per Annexure A of the SEBI Circular dated November 03, 2020 issued by the DT, any other report/ certificate as applicable etc. on the system. 7. Recording of charge creation and charge registration details on the system: 7.1. Pursuant to creation of charge in favour of DT (as per provisions of SEBI Circular dated November 03, 2020), the Issuer shall upload the details of the charge created ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, Recovery Expense Fund j. Other non-financial covenants such as credit rating, negative lien undertaking, etc. 10.2. DTs shall validate the covenants so entered by the Issuer within seven working days of signing the Debenture Trust Deed including in the cases where the same have not been entered by the Issuers. B. Periodic monitoring of Security Cover, Asset Cover and Covenants 11. Issuer shall provide the half yearly certificate by the statutory auditor specifying the security cover and asset cover and upload the same on the system within 45 days/ 60 days as specified under the provision of SEBI (LODR) Regulations, 2015 in format as specified vide SEBI Circular(s) from time to time. 12. The Issuer shall upload on a periodic basis the necessary and applicable documents, information within stipulated time so as to enable DT(s) to exercise the above functions as per terms and timelines set out in SEBI Circular dated November 12, 2020 or any other Circular issued by SEBI. 13. In order to carry out periodical monitoring on security created/ covenants or asset cover, the DT shall: 13.1. Upload the security cover certificate and shall validate the asset cover certificate. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate. 16.2. The DT shall release charges in case any debt is repaid and update/ validate the same in the platform. D. Credit Rating information 17. Issuer at the time of creation of temporary ISIN/ ISIN shall upload the credit rating information for non-convertible securities including rating action, date of press release and hyperlink for press release of credit rating. CRAs shall access the platform to validate the rating information uploaded by the Issuer. In case of any discrepancy, Issuer or CRAs shall notify the same on system and update the correct information in the system within three working days of such notification. 18. Any subsequent rating actions carried out by CRAs shall be recorded in system by the Issuer within one working day of the press release, which shall inter-alia include rating action including rating outlook, date of press release and hyperlink for press release of credit rating. In case of any discrepancy, Issuer or CRA shall notify the same on system and CRAs shall update the correct information in the system within two days of such notification. 19. Applicability: The above system shall come into effect from April 01, 2022. However, testin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l submit documents given as per November 03, 2021 circular and other documents given by Issuer for ascertaining the existence, veracity and value of assets. c. Documents related to existing encumbrance on assets/security offered: Issuer shall record following details on platform or submit documents: i. For unencumbered assets, an undertaking that the assets on which charge is proposed to be created are free from any encumbrances. ii. For encumbered assets, on which charge is proposed to be created, the Issuer shall submit documents in system as per para 4.3 of SEBI Circular dated November 03,2020 and any other document required to be given by Issuer to DT. Annexure A2 Manner of updation of charge creation details on System: 1. Issuer shall enter the following details related to charge created on system as and when applicable: 1.1. Asset details 1.2. Type of Charge Creation 1.3. Charge holder 1.4. Amount 1.5. Date on which charge is created 1.6. Modification date 1.7. Charge Closure date i.e. redemption date. 2. System shall ensure every charge details recorded in the system shall have a unique number. Therefore, an asset with a unique asset ID shall be m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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