Regulatory updates

The Legal Entity Identifier (LEI) is a unique 20-character code — like a bar code — used across markets and jurisdictions to uniquely identify a legally distinct entity that engages in a financial transaction.

On 3 May 2023, the Securities and Exchange Board of India (SEBI) issued a circular, introducing the Legal Entity Identifier (LEI) system for issuers that have listed or are planning to list non-convertible securities, securitised debt instruments and security receipts.

Presently, the Reserve Bank of India (RBI) directions mandate non-individual borrowers having aggregate exposure of above INR25 crore, to obtain an LEI code. SEBI has stated the following timelines for the issuers to obtain and report LEI code:

Further, the requirement of LEI for issuers proposing to list or that have outstanding municipal debt securities will be specified in future. Entities can obtain the LEI code from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF).

Effective date: The requirements are effective immediately.

To access the text of the circular, please click here

In February 2023, certain amendments had been issued to the provisions of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations), w.r.t. widening the definition of ‘Green Debt Security’ (GDS), thereby encompassing ‘transition bonds’ as one of the sub-categories of GDS. According to the NCS Regulations, ‘transition bonds’ comprise of ‘funds raised for transitioning to a more sustainable form of operations, in line with India’s Intended Nationally Determined Contributions.’

Further, on 6 February 2023, SEBI had issued the revised disclosure requirements for such issuances. In this regard, with a view to facilitate transparency and informed decision-making among the investors and to ensure that the funds raised through transition bonds are allocated towards the purpose for which they are raised, SEBI vide a circular dated 4 May 2023 prescribed certain additional disclosure requirements for the issuance and listing of transition bonds. These include:

• GB-T denotation: For differentiating transition bonds from other categories of GDS, an issuer should disclose the denotation GB-T in the offer documents on cover page as well as in the type of instrument field in term sheet. The same should also be disclosed in the centralised database for corporate bonds/debentures
• Transition plans: Details of transition plans such as interim targets, project implementation strategy, usage of technology and overseeing mechanism must be disclosed in the offer document
• Revision in the transition plan: Revised transition plan accompanied by an explanation for each revision should be disclosed to the stock exchanges
• Disclosure in annual report: Details of transition plan along with a brief on the progress of its implementation should be disclosed in the annual report.

Effective Date: The provisions of this circular have come into effect from 4 May 2023.

To access the text of the circular, please click here