SEBI requires Listed entities to make disclosures w.r.t. defaults on payments of interest, repayment of principal amount on loans etc. w.e.f. 1st October, 2017
In a Circular dated 4th August, 2017 issued under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), the Securities and Exchange Board of India (“SEBI”) has issued directions upon Listed entities who have defaulted on payments of interest, repayment of principal amount on loans from banks, Financial Institutions, debt securities etc. to make disclosures such as nature of obligation, date of default, type of instrument, etc.
This Circular will come into effect from 1st October, 2017.
The LODR Regulations currently require disclosure of material events or information by listed entities to stock exchanges. Specific disclosuresare required under the LODR Regulations in certain matters such as delay or default in payment of interest or principal on debt securities, including listed Non-Convertible Debentures, listed Non-Convertible Redeemable Preference Shares, Foreign Currency Convertible Bonds(FCCBs) etc.
However, disclosures with respect to loans from banks and financial institutions are presently not stipulated. As a result, many banks are presently under considerable stress on account of large loans to the corporate sector turning into stressed assets / Non – Performing Assets (NPAs).
With a view to address this critical gap in availability of information to investors, listed entities are directed to comply with the requirements of this Circular.
Key Highlights of the Circular;
- The circular will be applicable to all listed entities which have listed any of the following:
- Specified securities (equity and convertible securities), or
- Non-convertible debt securities and non-convertible and redeemable preference shares.
- The disclosures must be made to the stock exchanges when the entity has defaulted in payment of interest / instalment obligations on debt securities(including commercial paper), Medium Term Notes (MTNs), Foreign Currency Convertible Bonds (FCCBs), loans from banks and financial institutions, External Commercial Borrowings (ECBs) etc.
- ‘Default’for the purpose of this circular will mean non-payment of interest or principal amount in full on the pre-agreed date.
- Listed entities entity must separately provide information pertaining to defaults to the concerned Credit Rating Agencies in a timely manner as specified by SEBI from time to time.
- The entities must make certain disclosures including the following within one working day from the date of default at the first instance of default:
- In case ofDebt securities, Foreign Currency Convertible Bonds, etc., disclosures such as nature of obligation, type of instrument, number of investors in the security on the date of default, etc. must be made.
- In case of loans from banks, financial institutions, etc. disclosures such as nature of obligation, current default amount in crores, total amount of borrowings, etc. must be made.
For the list of disclosure please refer to the document attached.