The Securities and Exchange Board of India (“SEBI”) has notified amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 to strengthen transparency and accountability in the debt capital markets for entities with listed non-convertible securities.
Earlier, companies operating solely in the debt market benefited from a relatively relaxed governance regime compared to equity-listed firms. However, under the new rules, once a company’s outstanding listed non-convertible debt crosses ₹1,000 crore, it is required to adhere to a much more rigorous set of corporate governance norms with the intent of raising the level of transparency and accountability for debt listed entities and getting them at par with equity listed companies.
SEBI has introduced a new category of High-Value Debt Listed Entities (“HVDLEs”) which applies to companies that have listed debt instruments exceeding ₹1,000 crore. This introduction marks a significant shift in the way corporate governance is enforced in India’s debt markets, aiming to bring them closer to the standards followed by equity-listed entities.
One of the most significant changes is the requirement for HVDLEs to restructure their boards. Companies must now ensure that at least half the board comprises non-executive directors, and that at least one-third are independent. Additionally, the board must include at least one-woman director. Committees such as the audit committees and nomination & remuneration committees are now mandatory, similar to the equity-listed entities. These requirements ensure that key decisions, especially those relating to finances and personnel, are made with oversight and due diligence.
Another significant shift lies in the treatment of related party transactions. HVDLEs will now require prior shareholder approval for material transactions with related parties. Further, such companies are now required to disclose material events including cyber incidents, fraud, defaults, and arrests of key managerial personnel, within 24 hours. This level of timely disclosure was previously lacking in the debt space and is expected to greatly reduce information asymmetry between issuers and investors.
These changes clearly indicate that SEBI is trying to align debt governance with equity-like standards. Public capital, regardless of whether it is raised through equity or debt, demands public accountability. This move not only elevates governance standards but also pushes the entire market toward a culture of greater transparency. This structural shift also recognizes the growing role of the corporate bond market in India’s financial ecosystem and lays down the framework for responsible borrowing.
Written by: Mohit Dujari
Co-authored by: Amiya Mukherjee
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