Debenture Trust Deed explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A debenture trust deed is the document by which a company that issues secured debentures puts a trustee in charge of protecting the debenture holders. It records the terms of the issue, the security, the trustee's powers and duties, the events of default and the company's obligations. The statute is section 71 of the Companies Act, 2013, read with rule 18 of the Companies (Share Capital and Debentures) Rules, 2014, which also prescribes Form SH-12 for the deed. This guide gives a specimen deed in our own words, explains each clause and covers how the trustee is appointed and removed. If you are preparing a secured debenture issue, our loan documentation team can prepare the deed and the related papers.
A company that makes a public offer, or an offer to more than five hundred persons, of debentures must first appoint one or more debenture trustees (section 71(5)). For secured debentures, rule 18(1)(c) says the company must appoint the trustee before the prospectus or letter of offer and execute the trust deed not later than sixty days after allotment, while rule 18(5) says the deed in Form SH-12 or as near as possible must be executed within three months of closure of the issue or offer. Read both periods as printed and plan to sign within the shorter one. Section 71(7) makes void any clause that exempts the trustee from liability for breach of trust where it fails to show due care and diligence, subject to the proviso for exemptions agreed by three-fourths in value of the debenture holders.
When a debenture trust deed is needed
You need a trust deed whenever secured debentures are issued under section 71(3) and rule 18, because the security must be created in favour of the debenture trustee and the trustee must be bound by written terms. Typical cases are privately placed secured debentures, secured non-convertible debentures, and structured term debt.
Rule 18(6) says sub-rules (2) to (5) of rule 18 do not apply to a public offer of debentures. A public offer of listed debentures follows securities-market regulations that sit outside this article; see our guide on NCDs and listing compliance.
Appointing the trustee: what rule 18 requires
Rule 18(2) lists the conditions for appointing debenture trustees under section 71(5). In summary:
- The trustee's name must appear in the letter of offer and in every later notice or communication to debenture holders.
- The trustee's written consent must be taken before appointment, and a statement of that consent must appear in the letter of offer.
- A person cannot be appointed as trustee if he beneficially holds shares in the company; is a promoter, director, key managerial personnel, other officer or employee of the company or its holding, subsidiary or associate company; is beneficially entitled to money payable by the company other than the trustee's remuneration; is indebted to the company or its group; has stood surety for the principal debt or interest; has a pecuniary relationship with the company amounting to two per cent or more of its gross turnover or total income, or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, in the two preceding years or the current year; or is a relative of a promoter or of a director or key managerial personnel in the company's employment.
- The Board may fill a casual vacancy; if the vacancy arises from the trustee's resignation, it may be filled only with the written consent of the majority of debenture holders.
- A trustee may be removed before the end of the term only if holders of not less than three-fourths in value of the debentures outstanding approve at their meeting.
Where the trustee is a company or financial institution, check the eligibility tests against the corporate group, not just the entity.
Specimen debenture trust deed
This is a general model for a secured issue. It follows the headings that rule 18(5) and Form SH-12 expect: description of the issue, details of the charge, appointment of the trustee, events of default, company obligations and miscellaneous terms. Check the current form before use.
DEBENTURE TRUST DEED This Debenture Trust Deed is made on at BETWEEN , a company incorporated under the Companies Act, 2013, CIN , having its registered office at (the "Company"); AND , , having its office at (the "Trustee"), acting for the benefit of the holders of the Debentures (the "Holders"). BACKGROUND A. The Company has, by a Board resolution dated and a special resolution of its members dated , approved the issue of secured debentures of aggregate face value up to (the "Debentures") on the terms of the offer document dated . B. The Company has appointed the Trustee as debenture trustee under section 71(5) of the Companies Act, 2013. The Trustee has given its written consent, which was stated in the offer document. The Trustee confirms that none of the disqualifications in rule 18(2)(c) of the Companies (Share Capital and Debentures) Rules, 2014 applies to it. C. The Debentures were allotted on and this Deed is signed within the period allowed by law. THE PARTIES AGREE AS FOLLOWS: 1. Definitions. "Act" means the Companies Act, 2013. "Secured Assets" means the assets described in the Schedule. "Default Event" means an event in clause 12. Other words have the meaning in the offer document. 2. Description of the issue. The Debentures are debentures of face value each, issued for the purpose of , with tenure of , interest at payable by , and redemption on . The Company shall pay interest and principal to the Holders when due. 3. Conversion or redemption. . A conversion option requires the approval required by section 71(1). 4. Security. As continuing security for the Debentures, the Company creates in favour of the Trustee a charge on the Secured Assets, ranking . The Company confirms that the Secured Assets are its own and clear of other encumbrances except as listed in the Schedule. 5. Cover and valuation. The Company shall maintain asset cover of at least throughout the life of the Debentures, shall provide a valuation of the Secured Assets on and shall top up the security within of a shortfall. 6. Preservation and inspection. The Company shall keep the Secured Assets in good condition and insured for with the Trustee noted as interested party, and shall allow the Trustee or its agents to inspect the Secured Assets and the books of account on . 7. Future assets and disposal. Assets acquired later that are described in Part B of the Schedule shall come within the security within . The Company shall not sell, lease or part with the Secured Assets except with the Trustee's approval, which may be given where the Holders' security is not harmed. 8. Registration of charge. The Company shall file the particulars of the charge with the Registrar of Companies within the period in section 77 of the Act and give the Trustee a copy of the filing and of the certificate of registration. 9. Further charges. The Company shall not create any further charge on the Secured Assets without the Trustee's prior approval. 10. Trustee: appointment and acceptance. The Trustee accepts the trust. Its remuneration, fees and expenses are set out in Schedule . 11. Trustee: powers and duties. The Trustee shall: (a) satisfy itself that the offer document is consistent with the terms of the issue and this Deed; (b) satisfy itself that the covenants in this Deed are not prejudicial to the Holders; (c) call for periodic status or performance reports and reports on the use of the funds raised; (d) tell Holders promptly of any default in interest or redemption and of the action it has taken; (e) ensure that security is created, the debenture redemption reserve (where required) is maintained and the assets are sufficient to meet interest and principal; (f) take reasonable steps to remedy a breach and tell Holders of it; (g) convene Holders' meetings when required; (h) ensure that conversion or redemption follows the terms of the issue; and (i) do all acts needed to protect the Holders and resolve their grievances. The Trustee has the right to inspect the Company's registers and take copies. 12. Default Events. Each of the following is a Default Event: (a) the Company makes two consecutive defaults in paying interest due; (b) the Company ceases or threatens to cease its business without the Holders' consent; (c) an order of the Tribunal or a special resolution is passed for winding up; (d) the Company breaches the offer document or a covenant of this Deed and does not remedy it within of notice; (e) the Company creates or attempts to create a charge on the Secured Assets without approval; (f) in the Trustee's opinion the Holders' security is in jeopardy; (g) . 13. Steps on default. On a Default Event the Trustee shall give notice to the Company and call a meeting of Holders to decide on enforcement. Until security becomes enforceable, the Company may hold and use the Secured Assets in the ordinary course of business. 14. Nominee director. The Trustee shall appoint a nominee director on the Company's Board on two consecutive defaults in paying interest, a default in creating security, or a default in redemption. The Company shall alter its articles, if needed, to allow this. 15. Application of proceeds. Money received on enforcement shall be applied: first, to the Trustee's costs and remuneration; second, to interest due; third, to principal due; and the balance, if any, to the Company, with shortfalls shared among Holders in proportion to the face value held. 16. Company's obligations. The Company shall: (a) keep a register of Holders and record transfers; (b) keep proper books open to the Trustee; (c) provide reports, balance sheets and statements the Trustee reasonably needs; (d) pay taxes, cesses and insurance on the Secured Assets on time; (e) create and maintain the debenture redemption reserve and, where required, the amounts to be invested or deposited; (f) not declare a dividend in a year unless it has paid or made satisfactory provision for instalments of principal and interest due; (g) tell the Trustee in advance of any change in the nature of its business, any significant change in its Board, any proposed merger or reconstruction, and any court or tribunal order affecting the Secured Assets; (h) send the Trustee periodic reports with an updated list of Holders, details of unpaid interest with reasons, a statement of grievances received and their status, and a statement that the assets are sufficient to meet the claims of Holders; and (i) follow every direction of a regulator on the issue. 17. Resignation, removal and replacement. The Trustee may resign on written notice but shall not give up office until another trustee has accepted appointment. The Holders may remove the Trustee at a meeting by a resolution passed by Holders of not less than three-fourths in value of the Debentures outstanding. A casual vacancy shall be filled by the Board; where the vacancy follows the Trustee's resignation, the new appointment needs the written consent of the majority of Holders. The new trustee shall meet the conditions in rule 18(2). 18. Meetings of Holders. The Trustee shall convene a meeting of all Holders on a written requisition signed by Holders holding at least one-tenth in value of the Debentures outstanding, and on any event that is a breach or default or that in its opinion affects the Holders' interest. Procedure for notice, quorum and voting is in Schedule . 19. Liability of the Trustee. Nothing in this Deed excuses the Trustee from liability for breach of trust where it fails to show the degree of care and due diligence required of it. Any exemption from liability agreed by the Holders shall be limited to what section 71(7) allows. 20. Modification. This Deed may be modified by agreement between the Company and the Trustee only if the Trustee is satisfied that the change is in the interests of the Holders and, where required, with the consent of Holders by the majority specified in Schedule . 21. Inspection and copies. The Company shall make this Deed open to inspection by any member or Holder and shall send a copy on request within seven days, on payment of the fee, as rule 18(8) provides. 22. Notices. Notices shall be in writing, delivered to the addresses above, and are effective on . 23. Costs. The Company shall pay the stamp duty on this Deed and the Trustee's costs of preparing, signing and enforcing it. 24. Grievances. The Company and the Trustee shall maintain a process to receive and resolve Holders' grievances as set out in Schedule . 25. Governing law and disputes. This Deed is governed by the laws of India. Disputes shall be resolved by ]. IN WITNESS WHEREOF the parties have signed this Deed on the date first written above. For For Name: Name: Designation: Designation: Signature: ____________ Signature: ____________ WITNESSES 1. Name: Address: Signature: ____________ 2. Name: Address: Signature: ____________ SCHEDULE - Secured Assets: Part A ; Part B ; Existing charges: SCHEDULE - Trustee's remuneration and expenses: SCHEDULE - Procedure for Holders' meetings: SCHEDULE - Grievance process:
Clause-by-clause explanation
| Clause | What it does | Drafting tip |
|---|---|---|
| Background | Records approvals, trustee consent and timing | Quote the dates of the Board and shareholder approvals |
| Description of issue (2, 3) | Amount, tenure, interest, redemption, conversion | Match the offer document exactly |
| Security (4 to 9) | Creates and preserves the charge | State the rank of the charge and describe assets precisely; file with the Registrar |
| Trustee (10, 11) | Accepts trust, lists duties and rights | Take the duty list from rule 18(3); do not dilute it |
| Default Events (12, 13) | Lists when security becomes enforceable | Include two consecutive interest defaults and the other events the rule form expects |
| Nominee director (14) | Gives the trustee a seat on the Board | Check articles allow it |
| Proceeds (15) | Fixes the order of payment | Costs, then interest, then principal |
| Company obligations (16) | Covenants on books, reports, reserve, dividend, notice | Keep the reporting list; the trustee needs it to do its job |
| Removal and replacement (17) | Resignation, three-fourths removal, vacancies | Do not allow resignation until a replacement accepts |
| Meetings (18) | When Holders meet | Use the one-tenth requisition threshold printed in rule 18(4) |
| Liability (19) | Preserves the section 71(7) position | Do not draft a blanket exemption |
| Inspection (21) | Gives members and Holders access | Provide the seven-day copy rule |
The law behind the deed
Section 71(3) allows secured debentures on prescribed terms. Section 71(5) requires one or more debenture trustees to be appointed before a prospectus or an offer of debentures to the public or to more than five hundred members. Section 71(6) sets the trustee's task: take steps to protect the Holders' interests and redress their grievances. Section 71(4) requires a debenture redemption reserve out of profits available for dividend, and rule 18(7) sets how that applies to different classes of company. Section 71(9) and (10) allow the trustee to approach the Tribunal when assets look insufficient or the company fails to redeem or pay interest. Section 71(13) lets the Central Government prescribe the form of deed, and rule 18(5) prescribes Form SH-12. See our posts on section 71, rule 18(1) to (6) and the guide to debentures: types, issue and compliance.
Charge registration is governed by section 77 of the Companies Act, 2013: particulars of the charge, signed by the company and the charge-holder with the instruments creating it, must be registered with the Registrar within thirty days of creation, with extended periods allowed on conditions set out in the provisos. See filing a charge with the Registrar.
Stamp duty, registration and execution
A debenture trust deed is ordinarily an instrument chargeable with stamp duty. The amount is fixed by the Stamp Act and Schedule of the State where it is executed; see stamp duty on bonds and debentures and stamp duty on legal documents, State-wise. On registration, section 17(2)(iii) of the Registration Act, 1908 says clauses (b) and (c) of section 17(1) do not apply to a debenture not creating or extinguishing an interest in immovable property, except in so far as it entitles the holder to the security afforded by a registered instrument by which the company mortgaged or transferred its immovable property to trustees for the debenture holders. A deed that itself mortgages immovable property may therefore need registration; check the position for your assets.
Execution steps: pass the Board and shareholder approvals; take the trustee's consent; settle the schedules; sign within the period allowed; file the charge particulars with the Registrar; update the register of Holders; and keep the deed open for inspection. Our posts on the trust deed form and trustee under rule 18 cover the rule in more detail.
Common mistakes
- Appointing a trustee that fails the rule 18(2)(c) tests, for example one that is related to a promoter or has a pecuniary relationship with the company above the limits.
- Omitting the trustee's consent statement from the offer document.
- Missing the sixty-day or three-month period for signing the deed.
- Describing the Secured Assets in general words without location, title and value basis.
- Skipping registration of the charge with the Registrar.
- Drafting an exemption clause that shields the trustee from breach of trust, contrary to section 71(7).
- Leaving out the nominee director mechanism.
- Allowing the trustee to resign before a replacement accepts.
Need help with a debenture trust deed?
If you are planning a secured debenture issue, we can prepare the trust deed, the schedules and the charge filings, and check the trustee's eligibility and the timelines. Speak to our loan documentation support team.
Key takeaways
- Section 71(5) requires a debenture trustee before certain offers; rule 18 sets who may be appointed and how.
- Rule 18 prints two timing periods for the deed; plan to sign within the shorter.
- Form SH-12 headings are the backbone of the deed.
- The trustee cannot be exempted from liability where it fails to show due care and diligence, subject to the section 71(7) proviso.
- Register the charge with the Registrar under section 77.
Read next
- Debenture deed: first and second charge format
- Section 71 of the Companies Act, 2013: debentures
- Debentures: types, issue process and compliance
- Filing a charge with the Registrar
Disclaimer: This specimen is a general model for information. Every document must be adapted to its facts and to the law, rules and forms in force when it is signed or filed; stamp duty, registration and court fees depend on the State and the forum. This article is general information, not legal advice; check the official text before acting.