SEBI has amended Chapter IV of the Debenture Trustee (DT) Master Circular to clarify the creation and utilisation of the Recovery Expense Fund (REF), aiming to streamline enforcement actions during issuer default. Separately, SEBI has prescribed precise timelines for issuers to submit periodic reports and certificates to DTs, strengthening monitoring and due-diligence obligations.

Modifications to Chapter IV – Recovery Expense Fund (REF)

The introductory paragraph of Chapter IV is revised to clearly mandate creation of an REF by issuers, enabling DTs to take prompt enforcement or legal action in case of default. SEBI has expanded the REF framework to specify permissible utilisation, including legal proceedings, obtaining debenture-holder consents, voting processes, meetings, court filings, legal fees, and asset recovery services.

For uses expressly covered under paragraph 2.1, DTs do not require prior debenture-holder approval but must notify holders via email and website publication. For any utilisation beyond the list, DTs must obtain prior consent of debenture-holders and intimate the designated stock exchange.

DTs must submit an independent auditor’s certificate to the designated stock exchange, which will verify expenses before releasing REF funds. The exchange must release funds lying in REF within five working days of receiving intimation. The circular introduces a clear definition of “Lead Debenture Trustee” and mandates annual reporting on REF utilisation to debenture-holders, along with proper accounting of all expenses.

2. Timelines for Submission of Information by Issuer to Debenture Trustee(s)

SEBI has formalised fixed periodicity for key issuer submissions to ensure DTs can perform continuous monitoring. These timelines align with Chapter VI of the DT Master Circular and must be complied with from the quarter ending December 31, 2025.

1. The mandated reporting frequencies are:

• • Security Cover Certificate (Annex-VA format): Quarterly within 60 days from quarter-end (75 days for last quarter).
  • Statement of Pledged Securities: Quarterly within 60 days.
  • Statement of Value of Debt Service Reserve Account / other security: Quarterly within 60 days.
  • Net Worth Certificate of Personal Guarantor: Half-yearly within 60 days.
  • Guarantor Financials (Corporate Guarantee): Annually within 60 days from financial year-end.
  • Valuation & Title Search Report for immovable/movable assets: Once in three years within 60 days of financial year-end.

Additional modifications to Chapter IV of the DT Master Circular (Recovery Expense Fund) have been issued by SEBI vide Circular HO/17/11/12(3)2025-DDHS-POD1/I/145/2025 dated November 25, 2025, further updating the utilization guidelines and process requirements for REF.