A Debenture Trustee is a professional entity responsible for managing and safeguarding the interests of debenture holders in a bond or debenture issuance. In the context of GIFT City, a Debenture Trustee plays a crucial role in ensuring the protection of debenture holders by creating stipulated security and enforcing it for their benefit. Here are the key responsibilities and benefits of a Debenture Trustee in GIFT City:
Responsibilities of a Debenture Trustee:
- Appointment and Acceptance: The trustee enters into an agreement with the issuer before the opening of the subscription list, outlining duties, responsibilities, and other details.
- Prospectus Review: The trustee ensures the prospectus aligns with the debenture terms and trust deed.
- Monitoring and Oversight: The trustee monitors fund utilization reports, notifies debenture holders of defaults in interest, redemption, or security creation, and appoints a nominee director after two interest defaults or one security/redemption default.
- Security and Covenants: The trustee confirms the issuer does not breach debenture terms or trust deed covenants, ensures conditions are met for security creation, redemption reserves, and recovery funds, and verifies issuer and guarantor assets sufficiently cover principal and interest without unauthorized encumbrances.
- Enforcement and Protection: The trustee takes necessary steps to enforce security and protect debenture holders' interests, convenes debenture holder meetings when required.
- Conversion and Redemption: The trustee confirms proper conversion or redemption as per the issue terms.
- Possession and Administration: The trustee takes possession of trust property as per the trust deed and ensures debentures are credited to holders' demat accounts.
- Payment and Breach Reporting: The trustee confirms interest payments and redemption monies are distributed on time and reports any trust deed or regulatory breaches to the Authority.
- Due Diligence: The trustee independently verifies security is free of encumbrances or obtains consent before creating a charge.
- Transition Arrangements: The trustee does not relinquish the assignment until replaced by the issuer appointing a new trustee.
Debenture trustees in GIFT City IFSC can serve:
- Non-resident Indians (NRIs)
- Non-individual residents in India eligible under FEMA for offshore investment
- Individual residents in India eligible under the Liberalized Remittance Scheme of the Reserve Bank of India
- Persons resident outside India
- Indian Units: USD 1.5 million
- Foreign Entities: USD 3 million
- Application Fee: USD 500
- Registration Fee: USD 3500
- Annual Fee: USD 1500 (starting from the next financial year after approval)
- Enter agreements with issuers before opening subscription lists
- Avoid conflicts of interest with issuers
- Accept trust deeds containing comprehensive details of the debt issue
- Ensure prospectuses align with trust deeds
- Obtain periodic reports on fund utilization and company performance
- Communicate defaults to debenture holders
- Appoint nominee directors upon consecutive payment defaults
- Monitor issuer compliance with debenture terms and trust deed covenants
- Verify assets and enforce security measures for debenture holders
- Convene debenture holder meetings as needed
- Ensure timely redemption and interest payments
- Report breaches of trust deeds or laws to the Authority
- Inspect issuer records as necessary
Entities must appoint a Principal Officer with:
- A professional or post-graduate degree in finance, law, accountancy, or economics
- At least five years of relevant experience
- Sufficient staff with at least graduation degrees
