What is Debenture Trustee ? When is the appointment of Debenture Trustee mandatory? What conditions a company has to comply for the appointment of Debenture Trustee ? What is the eligibility for being a Debenture Trustee

What is a Debenture Trustee? A Debenture Trustee is an entity appointed by a company that issues debentures. Its primary role is to act as a liaison between the issuer company and the debenture holders, safeguarding the interests of the debenture holders. The debenture trustee acts in a fiduciary capacity, ensuring that the company complies with the terms and conditions of the debenture issue and protecting the rights of the debenture holders. When is the Appointment of Debenture Trustee Mandatory? The appointment of a debenture trustee is mandatory in the following situations: Companies Act, 2013 (Section 71(5)): If a company intends to issue a prospectus or make an offer or invitation to the public or its members exceeding 500 for the subscription of its debentures, the appointment of debenture trustees is mandatory. Such appointment must be made before the issue of debentures. SEBI (Issue and Listing of Non-convertible Securities) Regulations, 2021: If the debenture issue is proposed to be listed, a debenture trustee is required to be appointed for an issue of debentures, irrespective of whether it is privately placed or a public issue of debentures. Conditions a Company has to Comply for the Appointment of Debenture Trustee: For the appointment of debenture trustees, a company must comply with the following conditions: Disclosure in Offer Document: The names of the debenture trustees must be stated in the letter of offer inviting subscription for debentures and also in all subsequent notices or other communications sent to the debenture holders. Written Consent: Before appointment, a written consent from the debenture trustee must be obtained, and a statement to that effect must appear in the letter of offer. Disqualifications for Appointment: A person shall not be appointed as a debenture trustee if he: Beneficially holds shares in the company. Is a promoter, director, or key managerial personnel or any other officer or an employee of the company or its holding, subsidiary, or associate company. Is beneficially entitled to moneys which are to be paid by the company otherwise than as remuneration payable to the debenture trustee. Is indebted to the company, or its subsidiary or its holding or associate company or a subsidiary of such holding company. Has furnished any guarantee in respect of the principal debts secured by the debentures or interest thereon. Has any pecuniary relationship with the company amounting to two percent or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year. Is a relative of any promoter or any person who is in the employment of the company as director or key managerial personnel. Casual Vacancy: The Board may fill any casual vacancy, but while such vacancy continues, the remaining trustee(s) may act. If the vacancy is caused by resignation, it must be filled with the written consent of the majority of the debenture holders. Removal of Trustee: A debenture trustee can be removed from office before the expiry of his term only if it is approved by the holders of not less than 3/4th (75%) in value of the debentures outstanding, at their meeting. Eligibility for Being a Debenture Trustee: As per the SEBI (Debenture Trustees) Regulations, 1993, and other relevant provisions, only the following persons are entitled to act as a debenture trustee, after obtaining necessary registration from SEBI: A scheduled bank carrying on commercial activity. A public financial institution. An insurance company. A body corporate. Additionally, the capital adequacy requirement for registration as a Debenture Trustee, as specified under the SEBI (Debenture Trustees) Regulations, 1993, shall not be less than the net worth of ₹ 10 crore .