Sebi Proposes These Changes for High-Value Debt Listed Entities to Ease Compliance

The Securities and Exchange Board of India (Sebi) has put forward a plan to reduce the compliance burden of companies with large debts, by raising the threshold 'High Value Debt Listed Entities (HVDLEs)'. Currently, any entity that has outstanding non-convertible debt securities worth Rs 500 crore or more is classified as an HVDLE. Sebi suggests increasing this threshold to Rs 1,000 crore. This change is aimed at reducing the compliance burden on these entities. Public feedback on these proposals is open until November 15, 2024.

In its consultation paper released yesterday, Sebi also mentioned a proposal for adding a sunset clause, which would allow HVDLEs to drop certain governance requirements if their outstanding debt falls below the threshold for a set period. This would give such companies more flexibility in managing their obligations.

Sebi proposed creating a dedicated chapter within the Listing Obligations and Disclosure Requirements (LODR) Regulations, focusing solely on corporate governance for HVDLEs, setting them apart from equity-listed entities. Further, governance reports should be filed in XBRL format voluntary Business Responsibility and Sustainability Reporting (BRSR), and harmonise HVDLE reporting with equity-listed entities. Additionally, HVDLE reporting would be aligned with the reporting requirements for equity-listed entities.

Sebi also plans to cap the number of committees a director can be part of, whether in equity or debt-listed entities. This would help in preventing over-commitment and ensure they can fulfil their responsibilities effectively.

Other Key Reforms

From November 1, 2024, Sebi is also simplifying application for public debt securities by requiring individual investors to use UPI for amounts up to Rs 5 lakh starting November 1, when applying through intermediaries.  This simplification is expected to attract more retail investors into the debt segment.

Further, the minimum subscription period for public issues of debt securities is reduced to two working days from three days, with bidding extensions limited to one day and public comment periods shortened for draft offer documents to one day for already-listed securities and five days for others.