Securities market regulator SEBI proposes to tighten the rules governing debenture trustees (DTs) in a new consultation paper published on Thursday. The changes are meant to “harmonise the existing provisions with that of the Companies Act, 2013,” the paper said. A debenture trustee means a trustee appointed in respect of any issue of debentures of a body corporate, according to the new document.

SEBI had set up a Task Force comprising SEBI officials and representative of DTs for examining the rules. Several existing provisions in the DT Regulations had reference to the Companies Act, 1956, which has been repealed and replaced by the Companies Act, 2013. Also, provisions regarding liability for actions against DTs with regard to default/ non-compliance were required to be modified in sync with other SEBI norms so as to have consistency, the regulator believed.

The proposed amendments alter the provisions relating to the definition of ‘associate’, ‘debenture’ and ‘principal officer (PO)’; the agreement between the DT and the issuer and the provisions relating to the board’s right to inspect and disciplinary proceedings. It also re-defined the duties of debenture trustees, explains the end-utilisation certificate from the issuer’s auditors and outlines the liabilities for actions in case of default.

SEBI has also proposed that wherever government provides guarantees for the debentures issued, the proposed prohibition to act as DT may not be applicable. SEBI is also proposing to change the definition of PO, who is entrusted with overseeing the activities of the DT. The paper is open for public comments till March 8.