SEBI issued a circular regarding the appointment of a Director nominated by the Debenture Trustee on boards of issuers

The Securities and Exchange Board of India (SEBI) on July 04, 2023, issued a circular regarding the appointment of a Director nominated by the Debenture Trustee on boards of issuers.

While this obligation exists for issuers that are companies under the Companies Act, 2013, there is no similar obligation for issuers that are not companies. In this regard, representations have been received from Debenture Trustees.  A gist of the representations, as follows, merit attention:

• Issuers that are incorporated under different statutes/ are also under the purview of other regulators have expressed inability to execute such amendments as the composition of their boards is governed by certain statutes which do not provide for the appointment of nominee directors by Trustees.

• Appointment of any director on the boards of certain issuers which are governed by certain statutes requires prior approval of the President of India

• Certain issuers are unable to appoint Nominee Directors on their boards as their principal document/charter does not provide for the same; in a few cases, the absence of a statutory mandate fetters them from amending their principal document.

Accordingly, owing to the above-mentioned issues, issuers that fall in any of the categories mentioned in the above paras shall submit an undertaking to their Debenture Trustees that in case of events as mentioned in Regulation 15(1)(e) of SEBI (Debenture Trustees) Regulations, 1993, a non-executive / independent director/trustee/member of its governing body shall be designated as nominee director for the purposes of Regulation 23(6) of NCS Regulations, in consultation with the Debenture Trustee, or, in case of multiple Debenture Trustees, in consultation with all the Debenture Trustees.

[Circular No. SEBI/HO/DDHS/POD1/P/CIR/2023/112]