SEBI has issued a frequently asked questions (FAQ) to address concerns raised by companies and debt investment managers regarding recent amendments related to the issuance of debt securities, particularly debentures.

In the clarification, market regulator stated that debt-related documents only need to be sent to the company’s board and do not require approval prior to issuance.

CNBC-TV18 had reported on Thursday that debt investment managers were concerned the new amendments could potentially delay debenture funding altogether as they appear to require that the entire board review the document, which could pose challenges.

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The previous process, as of August 2021, was called the GID-KID method.

Under these regulations, companies would file a General Information Document (GID) with exchanges, containing detailed, board-vetted financial information.

When market conditions were favourable for raising funds, companies would then file a Key Information Document (KID), which only included pricing and commercial terms, vetted solely by the debenture committee with delegated board powers.

According to lawyers at Khaitan & Company, the original 2021 regulations, known as the GID-KID method, were designed to streamline raising debt and simplify the process for companies.

Some lawyers point out that SEBI’s amendment stems from recent instances where non-banking financial companies (NBFCs) failed to repay debenture holders, claiming that the board hadn’t approved the specific debenture issue.

To address this, SEBI introduced the amendment to ensure the final document is vetted by the board, preventing any future claims that the board was unaware of the details. The aim is to protect lenders and close this regulatory gap.

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