On Thursday, capital markets regulator Sebi clarified compliance with the Articles of Association (AoA) rules to first-time issuers of debt securities preparing for initial listing.

This comes after Sebi received representations from first-time issuers for private placements or public offerings of NCDs preparing for initial listing.

Such issuers ask regulators to provide a timeframe for amending the AoA, as shareholder approval and board and shareholder meetings are required for the amendment to be effective.

They also told regulators that the new rules would prevent many issuers from accessing the market due to buoyant lending or fundraising activity near the end of the fiscal year.

Given the difficulties faced by first-time issuers, Sebi has asked stock exchanges to undertake to such issuers that they will ensure that their AoAs are amended within six months from the date of listing of the debt securities.

This commitment is available when approval, in principle, is granted. During this period, issuers must comply with and report the compliance of changes to the stock exchange. The stock exchange will regularly monitor and remind such issuers to do what is necessary.

The Securities and Exchange Board of India (Sebi) said in a circular that the new guidelines would take effect immediately.

The Sebi NCS (Issue and Listing of Non-Convertible Securities) regulations require that the Articles of Association (AoA) of an issuer as a company include provisions regarding the requirement for the board of directors to appoint a person nominated by a bond trustee.

The regulation provides a maximum deadline of 30 September 2023 for existing debt-listed issuers to amend their AoAs.