Creation of Charge :
If the issuer proposes to create a charge or security on its assets in respect of secured convertible debt instruments, it is required to ensure that-
(i) such assets are sufficient to discharge the principal amount at all times;
(ii) such assets are free from any encumbrance;
(iii) where security is already created on such assets in favour of financial institutions or banks or the issue of convertible debt instruments is proposed to be secured by creation of security on a leasehold land, the consent of such financial institution, bank or lessor for a second or pari passu charge has been obtained and submitted to the debenture trustee before the opening of the issue;
(iv) the security/asset cover is required to be arrived at after reduction of the liabilities having a first/prior charge, in case the convertible debt instruments are secured by a second or subsequent charge.