Who is a Debenture Trustee? What are the eligibility and duty of a Debenture trustee?
A debenture is an instrument of debt executed by the company acknowledging its obligation to repay the sum at a specified rate and also carrying an interest. It is one of the methods of raising the loan capital of the company. A debenture trustee means a trustee of a trust deed for securing any issue of debentures of a body corporate.
Eligibility for a Debenture Trustee: The entity should be:
- A scheduled bank carrying on commercial activity
- An insurance company
- Body corporate
Duties of the Debenture Trustee
- Call for periodical reports from the body corporate, i.e., issuer of debentures
- Take possession of trust property in accordance with the provisions of the trust deed
- Enforce security in the interest of the debenture holders
- Exercise due diligence to ensure compliance by the body corporate with the provisions of the Companies Act
- Ensure on a continuous basis that the property charged to the debenture is available and adequate at all times
Securities and Exchange Board of India (SEBI) has asked debenture trustees to enhance their disclosure for listed debt securities with a view to protecting the interests of investors.