CAIRR Update April 6, 2022

Summary of the Circular and Notification issued by SEBI and IBBI dated 29/03/2022 and 05/04/2022

SEBI vide its circular dated 13/08/2021 introduced the DLT system w.e.f 01/04/2022 to record and monitor the security(ies) created and to monitor covenants of non-convertible securities. It also detailed the procedure for recording charge related information by the issuer, tracking and monitoring of such information by Debenture Trustees (DTs), Credit Rating Agencies, etc.

In continuation of the above circular, SEBI has now notified this operational circular highlighting manner of generation of 12-digit alphanumeric unique identifier that would be generated for each asset offered by the issuer as a security. This identifier would enable triggering an alert to the issuer and the Debenture Trustee based on the parameter-level validations for identifying possible duplicate entries for assets of an issuer.

Also, the issuer shall update any event reducing the security cover below the stipulated limit under LODR Regulations in the DLT immediately and trigger in this regard shall be sent to all concerned stakeholders.

The necessary details shall be captured in the DLT by all issuers proposing to issue non-convertible securities on or after 01/04/2022 before activation of the ISINs. For  the existing outstanding non-convertible securities, issuers shall record the details on or before 30/09/2022 and DTs shall verify the same by 30/11/2022.

Key highlights of the notification are:

1. Insolvency Professional (IP) shall intimate his/her appointment as liquidator within 7 days (as against earlier requirement of 3 days) to the Board.

2. Where no claim from creditors is received till the last date for receipt of claims, the liquidator shall prepare the list of stakeholders within 15 days from such date (as against 45 days if claims are received).

3. Proceeds from realization shall be distributed to the stakeholders within 30 days(as against 6 months) from the receipt of amount.

4. Timeline for completion of liquidation process has been brought down from 12 months to 270 days, where resolution is passed as per the Regulations/Code and 90 days, in all other cases from the liquidation commencement date.

5. On completion of liquidation process, Compliance Report(whose format is prescribed in the notification) has to be submitted along with Final Report and application for dissolution.