The Telegraph
Since 1st March, 1999
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Stiffer rules for corporate debt

New Delhi, Sept. 24 (PTI): The Securities and Exchange Board of India will soon come up with a set of stringent guidelines on private placement of debt issues as part of efforts to protect investors’ interest and bring in transparency in the market.

“We will soon come up with the guidelines on private placement of corporate debts,” said Pratip Kar, senior executive director, Sebi.

The move follows a flurry of private placement of corporate debt papers by companies last fiscal, most of which had not disclosed financial positions.

Sebi’s secondary market advisory committee, headed by R. H. Patil, has already issued a draft on private placement of corporate debts and invited public comments.

The committee has recommended a slew of measures to protect the investors’ interest and at the same time impart a high degree of transparency.

According to the recommendation of the Sebi committee, both listed and unlisted companies intending to raise debt either through private placement or public issue, should make “exhaustive disclosures” of their financial position, as required under Companies Act, Sebi guidelines and listing agreements with Stock exchanges.

If the debt issue is over Rs 10 lakh, the companies would have to make full disclosure on their website. They also need to appoint a debenture trustee for all debt issues.

Listed companies need to give full disclosure for outstanding debt papers as well.

A separate listing agreement may be devised for the debt papers of companies whose shares are not listed in bourses.

Sebi has also favoured that corporate debt papers be listed and traded in Demat form. The regulator also suggested that suitable amendments in the Companies Act may be made to safeguard investors by ensuring the stringent disclosure norms.

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