What is the role of Debenture Trustee in Case of Debentures Issued?

Classroom

oi-Sunil

By Sunil Fernandes

Published: Saturday, November 29, 2014, 10:15 [IST]

You have often heard about non convertible debentures. These can be secured and unsecured debentures. Every debenture has a Debenture Trustee who plays a major role during the tenure of the debentures.

In fact, if there are chances of a default their role is greatly enhanced as they have to ensure that they meet their obligations to ensure the safety of debenture holders.

Here are few of the Duties of a Debenture Trustee include:

(a) The Debenture Trustee Call for periodical reports from the body corporate, i.e., issuer of debentures.

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

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

(d) 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 amount payable in respect of the debentures and that such property is free from any
other encumbrances except those which are specifically agreed with the debenture trustee.

(e) Exercise due diligence to ensure compliance by the body corporate with the provisions of the Companies Act, the listing agreement of the stock exchange or the trust deed.

(f) To take appropriate measures for protecting the interest of the debenture holders as soon as any breach of the trust deed or law comes to his notice.

(g) To ascertain that the debentures have been converted or redeemed in accordance with the provisions and conditions under which they are offered to the debenture holders.

(h) Inform the Board immediately of any breach of trust deed or provision of any law.

(i) Appoint a nominee director on the board of the body corporate when required.

Information Courtesy: SEBI