PROCESS OF ISSUING NCDs ON PRIVATE PLACEMENT BASIS

Pre-Conditions

A Company can only issue Secured Non-Convertible Debentures (NCD’s). In case of issue

1. The date of redemption shall not exceed ten (10) years from the date of issue.
Provided that Infrastructure finance companies, Companies engaged in Infrastructure
projects, Infrastructure Debt Fund Non-Banking Financial Companies and Companies
permitted by Ministry or Department of Central Government or by RBI can issue
Debenture beyond a period of 10 years but up to 30 years
2. Such issue of debenture should be secured by creation of charge having value for the
due payment of the debenture and the interest thereon
3. The company shall appoint Debenture Trustee and Charge shall be created in favour
of the Debenture trustee
4. Qualification and role of Debenture Trustee must be clearly set out
5. Every Company required to create DRR shall on or before the 30th day of April
Deposit or invest as the case may be, a sum which shall not be less than 15% of the
amount of its debentures maturing during the year ending on 31st day of March of the
next year

The below-mentioned procedure for Private Placement of NCD’s has been explained in view
of Sections 42, 71 and 180 (1)(c) of the Act read with relevant rules.

TIMELINE

DAY-0
o Point to be kept in mind before calling of Meeting:
 Identify the person to whom you will issue Debentures.
 Prepare the list of such persons to whom offer to subscribe debenture will give.
  Prepare Draft offer letter under PAS-4.
 Identify the debenture trustee.
 Obtain the consent from debenture trustee.
 Ask the details from the Bank to open separate Bank Account.
 Identify the assets of the Company on which charge will be creating (in case of issue
of secured debenture).
 Obtain Credit Rating from at least one credit rating agency registered with the Board
i.e. SEBI. (If the Company intend to list its NCDs).

DAY-1
o Issue the Notice of the Board meeting

At least Seven days before Board Meeting fixing a meeting with a Notice for Agenda,
Notes on Agenda and Draft Resolution to be passed at the meeting.

o Intimation of Board Meeting to the Stock Exchange

At least 2 Working Days in advance to the Stock Exchange where securities of the
Company are listed excluding date of Intimation and date of Meeting

Day-9
o Convening of the Board Meeting
 Approval of the Board for issue of NCD’s and deciding the terms of issue
 Decide whether Company wants to issue Secured debenture or any other mode of
debentures and decide the terms of issue.
 Approval of Form PAS-4 (Private placement offer cum Application letter)
 Appointment of debenture trustee, if required
 Approval of Debenture Trust Deed to be executed with the debenture trustee
 Opening of separate bank account
 Approval of the Board to increase the borrowing limit of the Company u/s 180 (1)(c)
of the Act subject to approval of the members in general meeting, if required
 Issue the notice of general meeting along with explanatory statement for passing of
special resolution u/s 180 (1)(c) of the Act
 Delegation of Authority to Allotment Committee to issue and allotment of NCDs.
 Approval of Debenture Trust Deed to be executed with the debenture Trustee
Note:

 Holding of General meeting and passing of special resolution is not required in case
the issue will be within the borrowing limit of the Company as prescribed under
Section 180(1)(C) of the Act.
 Section 180 of the Act is not applicable to Private Company
o Outcome of Board Meeting to the Stock Exchange

Submit Outcome of Board Meeting to the Stock Exchange within 30 Minutes of

Day-10
o Filing of e-form MGT-14

The Company shall have to file certified true copy of Board Resolutions to the Registrar
of Companies (ROC) within 30 days of Board Meeting for issue of NCD’s and Filing of
this form with ROC within 30 days of passing the special resolution in general meeting, if
any.

The offer in Form PAS-4 together with all attachments should be dispatched.

o Circulation of Letter of offer and Application Form

The Letter of Offer and Application Form together with all attachments should be
dispatched.

Note: A Company shall issue Letter of Offer and Application Form only after the Board
Resolution has been filed with the Registrar of Companies.

o Opening of Separate Bank Account

The Company will have to open the Separate Bank account.

Day-20
o Payment from subscribers
 Receipt of money from all the subscribers along with a letter for approval of offer.
The payment to be made for subscription of debentures shall be made from the bank
account of the person subscribing to such debentures and the Company shall keep the
 record of the Bank Account from where such payment for subscription has been
received.
 Every identified person willing to subscribe to the private placement issue shall apply
in the private placement and application issued to such person along with subscription
money paid either by cheque or demand draft or other banking channel and not by
cash

Day-21

o Issue the Notice of the Board meeting/ Committee Meeting

Call a Board meeting for allotment of debentures by issuing a notice to all the Directors
of the Company at least seven days before the date fixed for the meeting along with
agenda, notes to agenda and draft resolutions to be passed at the meeting.

Note: The allotment of NCD’s shall be made within 60 days from the date of receipt of
subscription money.

Day-29
o Convening of the Board Meeting /Committee Meeting

Convene the Board meeting and pass the following resolutions:

 Allotment of NCD’s
 Authorize one or more Directors to issue and sign the debenture certificate
 Enter into Debenture trust deed (SH-12)
 Creation of Debenture Redemption Reserve
 Creation of Charge on the assets of the Company
o Outcome of Board Meeting/ Committee Meeting to the Stock Exchange
 Submit Outcome of Board Meeting/ Committee Meeting to the Stock Exchange
within 30 Minutes of Conclusion of Board Meeting/Committee Meeting with the
following details:
o Size of the Issue
o Whether securities to be listed? If Yes, Name of the Stock Exchange
o Tenure of the Instrument (with Date of Allotment and Date of Maturity)
o Coupon Rate / Schedule of Payment of Coupon / interest and principal
 o Charge/ Security, if any created over the assets
o Special right/ interest/ privileges attached to the instrument and changes
thereof;
o Delay in payment of interest /principal amount for a period of more than three
months from the due date or default in payment of interest / principal;
o Details of any letter or comments regarding payment/ non-payment of
interest, principal on due dates, or any other matter concerning the security
and /or the assets along with its comments thereon, if any;
o Details of redemption of Debentures
o Payment of Stamp Duty on NCDs

The Company shall have to make payment of Stamp Duty on allotment of NCDs

o Entry into Register of Member

The entries in the registers maintained under Section 88 of the Companies Act, 2013,
Form MGT-2 shall be made within 7 (Seven) days after the Board of Directors approves
the allotment of debentures

Day-35
o Filing of e-Form PAS-3

Filing of e-Form PAS-3 within 15 days of allotment of debentures to the Registrar of

Note: The Company shall not utilize monies raised through private placement unless
allotment is made and the return of allotment is filed with the ROC

Day-40
o Listing of Debentures

Where the issuer has disclosed the intention to seek listing of debt securities issued on
private placement basis, the issuer shall forward the listing application along with the
disclosures specified in Schedule I to the recognized stock exchange within fifteen days
from the date of allotment of such debt securities.
An issuer may list its debt securities issued on private placement basis on a recognized stock
exchange subject to the following conditions:

 The issuer has issued such debt securities in compliance with the provisions of the
Companies Act, 2013, rules prescribed thereunder and other applicable laws;
 Credit rating has been obtained in respect of such debt securities from at least one
credit rating agency registered with the Board;
 The debt securities proposed to be listed are in dematerialized form;
 The disclosures as provided in regulation 21 have been made: submission of MOA,
AOA, copy of last three years audited Annual Reports, Copy of the Board /
Committee Resolution authorizing the borrowing and list of authorized signatories.
 Where the application is made to more than one recognized stock exchange, the issuer
shall choose one of them as the designated stock exchange.

The issuer shall comply with conditions of listing of such debt securities as specified in
the Listing Agreement with the stock exchange where such debt securities are sought to
be listed

Note: - The entries in the registers maintained under Section 88 of the Act shall be made
within seven days after the Board of Directors approves the allotment of debentures.

o Filing of e-Form CHG-9

Filing of e-form CHG-9 with ROC within 30 days of creation of charge

Note: - Issue Debenture Certificate within 6 (Six) months from the date of allotment of
Debentures.

The Company shall follow the SEBI (Issue and listing of debt securities) Regulations in
case of listing of NCD’s:

 Obtaining credit rating from at least one credit rating agency registered with SEBI
 Intimation of the Board meeting to the stock exchange at least two working days in
advance where securities of the Company are listed excluding date of Intimation and
date of Meeting