DEBENTURE TRUSTEE

Debenture Trustee (DT) means a trustee of a trust deed for securing any issue of debentures of a Company. DT protects the interest of debenture holders in case the company fails to pay the principal as well as interest amount to the debenture holders. 

It is necessary that the company makes proper arrangements to extend assurances and comply with legal requirements in favour of the investors who are entitled to this type of security. The issuing company has to complete the process of finalizing and executing the trust deed or document and get it registered within the prescribed period and file the charge with the Registrar of Companies (ROC) in respect of the security offered. 

ROLE AND FUNCTIONS:

(i) Call for periodical reports from the Company, i. e., issuer of debentures.

(ii) Take possession of trust property in accordance with the provisions of the trust deed.

(iii) Enforce security in the interest of the debenture holders.

(iv) Ensure that the property charged to the debenture is available and adequate at all times to discharge the interest and principal amount payable in respect of the debentures and such property is free from any other encumbrances.

(v) Exercise due diligence to ensure compliance by the Company with the provisions of the Companies Act and the listing agreement or the trust deed.

(vi) To take appropriate measures for protecting interest of the debentures holders in case of any breach comes to notice.

(vii) To ascertain that the debentures have been converted or redeemed as per law.

(viii) Appoint a nominee director on the board of the Company, if required. 

APPLICATION FOR REGISTRATION:

(i) has in employment at least one person who possesses the professional qualification in law from an institute recognized by Government;

(ii) fulfills the capital adequacy requirements as may be specified; (not less than Rs. 1 Crore)  The Applicant shall be a schedule bank carrying on commercial activity, a public financial institution, an insurance company or a body corporate. 

DUTIES OF DEBENTURE TRUSTEES:

i) Call for periodical reports from the body corporate; 

ii) take possession of trust property in accordance with the trust deed; 

iii) enforce security in the interest of debenture holders; 

iv) do such acts as necessary in the event the security becomes enforceable;

v) carry out such acts as are necessary for the protection of the debenture holders and to do all things necessary in order to resolve the grievances of the debenture holders; 

vi) ascertain and specify that:

▪In case where the allotment letter has been issued and debenture certificate is to be issued after the registration of charge, the debenture certificates have been dispatched by the body corporate to the debenture holders within 30 days of the registration of charge with the ROC;

▪Debenture certificates have been dispatched to the debenture holders in accordance with the provisions of companies act;

▪Interest warrants for interest due on the debentures have been dispatched to the debenture holders on or before due dates;

▪Debenture holders have been paid the monies due to them on the date of redemption of debentures; 

vii) ensure on a continuous basis that the property charged to the debenture is available and adequate at all times to discharge the interest and principal amounts payable in respect of debentures and that such property is free from any other encumbrances. 

viii) Exercise due diligence to ensure compliance by body corporate, with the provisions of companies act, the listing agreement of stock exchange or trust deed; 

ix) inform SEBI immediately of any breach of trust deed or provision of any law; 

x) appoint a nominee director on the board of body corporate in the event of:

▪Two consecutive defaults in payment of interest to the debentures; or

▪Default in creation of security for debentures; or

▪Default in redemption of debentures 

xi) obtain a certificate from issuer‟s auditor:

▪In respect of utilization of funds during the implementation period of project;

▪In case of debentures issued for financing working capital at end of year. 

xii) Debenture trustee may inspect books of accounts, records, registers of body corporate and the trust property to the extent necessary for discharging its obligations.