**Executive Summary**
This circular, dated November 25, 2025, issued by the Securities and Exchange Board of India (SEBI), announces modifications to Chapter IV of the Master Circular for Debenture Trustees dated August 13, 2025. The modifications relate to the Recovery Expense Fund (REF) and aim to enable Debenture Trustees to take prompt action for enforcement/legal proceedings in case of 'default' in listed debt securities. The provisions of this circular are effective immediately.
**Key Points / Main Content**
* **Recovery Expense Fund (REF) Modifications:**
* The introductory paragraph of Chapter IV is modified to state that an issuer shall create a REF to enable the Debenture Trustee to take prompt action for enforcement/legal proceedings in case of 'default'.
* In the event of default, the Debenture Trustee/Lead Debenture Trustee may get reimbursed from the REF for enforcement/legal proceedings, including obtaining consents from debenture holders, voting process, holding meetings of debenture holders, filing court applications, legal fees, expenses for asset recovery services, and appointment of legal consultants.
* For purposes explicitly specified above, prior approval from debenture holders is not required. The Debenture Trustee must intimate debenture holders through mail and upload on its website regarding the reimbursement from REF. For purposes other than those explicitly specified, prior consent of the holders of debt securities is required, and the Designated Stock Exchange must be informed.
* The Debenture Trustee must inform the Designated Stock Exchange to release the amount from the REF and submit an independent auditor's certificate. The Stock Exchange will verify the certificate before releasing the funds.
* The Designated Stock Exchange shall release the amount to the Debenture Trustee/Lead Debenture Trustee within five working days of receipt of such intimation.
* Lead Debenture Trustee is defined as either the trustee chosen by other Debenture Trustees or one representing holders of more than 50% of the outstanding debt.
* The Debenture Trustee shall keep a proper account of all expenses incurred out of the funds received from REF and update the debenture holders annually on the utilization of such funds.
* **Other Provisions:**
* Remaining provisions of Chapter IV of the Master Circular remain unchanged.
* This circular is available on the SEBI website under the "Legal" category and "Circulars" dropdown.
**Impact Analysis**
**Debenture Trustees/Lead Debenture Trustees**
* **Impact:** Greater clarity and flexibility in utilizing the Recovery Expense Fund (REF) for enforcement actions, potentially leading to more efficient recovery processes and reduced difficulties in obtaining consent for specified purposes.
* **Action Required:** Understand the modified guidelines for utilizing the REF, including consent requirements, reimbursement procedures, and reporting obligations. Update internal processes and systems to comply with the new provisions.
**Issuers of Listed Debt Securities**
* **Impact:** A clearer understanding of the purposes for which the REF can be used.
* **Action Required:** Ensure that the REF is established and managed according to the updated guidelines.
**Designated Stock Exchanges**
* **Impact:** Defined role in releasing funds from the REF to Debenture Trustees and verifying the auditor's certificate.
* **Action Required:** Establish procedures for verifying the auditor's certificate and promptly releasing funds to Debenture Trustees within the specified timeframe.
**Debenture Holders**
* **Impact:** Increased transparency and potentially quicker recovery processes in case of default.
* **Action Required:** Stay informed about the utilization of REF and exercise their right to provide consent for uses beyond the explicitly specified purposes.
Key Entities Referenced
Master Circular for Debenture Trustees: A circular issued by SEBI, specifying provisions in respect of Recovery Expense Fund (REF).
Recovery Expense Fund (REF): A fund created by issuer to take prompt action for enforcement/legal proceedings in case of 'default' in listed debt securities which shall be used by Debenture Trustee under guidelines provided.
Debenture Trustee: Entity responsible for utilizing the Recovery Expense Fund according to specified guidelines.
Securities and Exchange Board of India (SEBI): The regulator issuing the circular and exercising powers under the SEBI Act, 1992, and various SEBI Regulations related to debenture trustees, listing obligations, and non-convertible securities.
CIRCULAR
HO/17/11/12(3)2025-DDHS-POD1/ I/145/2025 November 25, 2025
To,
All Registered Debenture Trustees,
Issuers who have listed and/ or propose to list debt securities,
Recognized Stock Exchanges, and
Recognized Depositories
Dear Sir/ Madam,
Sub: Modifications to Chapter IV of the Master Circular for Debenture Trustees dated
August 13, 2025
1. Chapter IV of the Master Circular for Debenture Trustees dated August 13, 20251 (‘DT
Master Circular’), inter-alia, specifies provisions in respect of Recovery Expense Fund
(REF).
2. While the DT Master Circular specifies the broad purpose of REF, it does not explicitly
specify the list of purposes for which REF can be utilized and hence, the DTs face certain
difficulties in obtaining consent as well as reimbursement from REF.
3. Accordingly, pursuant to the recommendations of the Working Group of DTs for Ease of
Doing Business, discussions in Corporate Bonds and Securitization Advisory Committee
(CoBoSAC) and public consultation, the following modifications to Chapter IV of the DT
Master Circular, are being specified:
3.1. The introductory paragraph is modified as under:
“In order to enable the Debenture Trustee to take prompt action for enforcement/ legal
proceedings in case of ‘default’ in listed debt securities, a ‘Recovery Expense Fund’
(REF) shall be created by issuer which shall be used by Debenture Trustee under
guidelines provided below.”
3.2. The paragraph 2 is modified as under:
“Manner of utilization of Recovery Expense Fund:
2.1. In the event of default, the Debenture Trustee/ Lead Debenture Trustee may get
reimbursed from the REF for all the related activities for enforcement/ legal
proceedings including but not limited to obtaining various consents from
debenture holders, voting process, holding of meetings of debenture holders,
filing court applications, legal fees, expenses for asset recovery services,
1 Master Circular no. SEBI/HO/DDHS-PoD-1/P/CIR/2025/117;
Page 1 of 3appointment of legal consultants in respect of enforcement/ legal proceedings in
the event of default.
2.2. In case the utilization of REF is for purposes explicitly specified under paragraph
2.1 above, prior approval from the debenture holders shall not be required.
Debenture Trustee shall intimate debenture holders through mail and upload on
its website regarding the reimbursement from REF. In case the utilization of REF
is for purposes other than explicitly mentioned in paragraph 2.1 above, the
Debenture Trustee/ Lead Debenture Trustee shall obtain prior consent of the
holders of the debt securities and shall inform the same to the Designated Stock
Exchange.
2.3. Debenture Trustee shall inform the Designated Stock Exchange to release the
amount from the REF and submit an independent auditor’s certificate regarding
the expenses incurred to the Stock Exchange, which shall be verified by the
Stock Exchange before release of the amount from the REF to the DT.
2.4. The Designated Stock Exchange shall release the amount lying in the REF to
the Debenture Trustee/ Lead Debenture Trustee within five working days of
receipt of such intimation.
2.5. For the purpose of the provisions of this Chapter, Lead Debenture Trustee shall
mean:
a. A Debenture Trustee who is chosen as the Lead Debenture Trustee by other
Debenture Trustees; or
b. A Debenture Trustee who represents holders of more than 50% of the
outstanding value of debt securities.
2.6. The Debenture Trustee shall keep a proper account of all expenses incurred out
of the funds received from REF.
2.7. The Debenture Trustee shall on an annual basis update the debenture holders
regarding the utilization of such funds.”
4. The remaining provisions of Chapter IV of the DT Master Circular remain unchanged.
5. The provisions of this circular shall come into effect immediately.
6. This circular is issued in exercise of powers conferred under Section 11(1) of Securities
and Exchange Board of India Act, 1992, Regulation 2A of the SEBI (Debenture Trustees)
Regulations 1993, Regulation 101 of the SEBI (Listing Obligations and Disclsoure
Requirements) Regulations, 2015, and Regulation 55 of the SEBI (Issue and Listing of
Non-Convertible Securities) Regulations, 2021, to protect the interest of investors in
securities and to promote the development of, and to regulate, the securities market.
Page 2 of 37. This circular is available on the website of the Securities and Exchange Board of India at
www.sebi.gov.in under the category “Legal” and under the drop down “Circulars”.
8. This circular is issued with the approval of the competent authority.
Yours faithfully,
Divya Hamirbasia
Deputy General Manager
Department of Debt and Hybrid Securities
Tel No. - 022-2644-9293
Email ID - divyah@sebi.gov.in
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