SEBI is inviting public comments on the proposed amendments to the REIT and InvIT rules. These amendments aim to clarify the unitholders' rights to nominate directors to the boards of investment managers or managers of REITs and InvITs. Currently, unitholders with the significant holdings can nominate the directors, but the amendments state that restrictions won't apply if the right is available under the SEBI (Debenture Trustees) regulations. This clarification addresses the market participants' requests. Public comments on the draft circulars are open until July 29. Amendments are proposed to the Master Circulars for InvITs and REITs dated May 15, 2024.
The Securities and Exchange Board of India (SEBI), the capital markets regulator, has invited public comments on proposed amendments to the master circulars governing Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). The amendments, detailed in a consultation paper, seek to address market participants' requests for clarification regarding the rights of unitholders to nominate directors to the boards of investment managers or managers of REITs and InvITs.
Currently, unitholders possessing a significant portion of units in a REIT or InvIT are entitled to nominate a director, provided their holdings exceed a specified threshold. However, there has been some ambiguity regarding the scope and application of these nomination rights. SEBI's proposed changes aim to resolve these uncertainties.
Specifically, the amendments propose that the existing restriction on nominating a unitholder nominee director should not apply if the right to appoint a nominee director is already available under the SEBI (Debenture Trustees) regulations. This adjustment would ensure that unitholders, who also serve as lenders to the investment manager or manager of the REIT/InvIT or their holding companies or special purpose vehicles (SPVs), can exercise their nomination rights without facing regulatory hurdles.
Market participants have pointed out the need for clear guidelines on the availability of the right to nominate a director on the Board of Directors of the Investment Manager of InvIT or Manager of REIT, especially when such nomination rights are also available to a unitholder in the capacity of a lender. To address these concerns, the proposed amendments aim to amend the Master Circulars for InvITs and REITs, both dated May 15, 2024. The amendments clarify that the restriction related to the right to nominate a Unitholder Nominee Director will not be applicable if the right to appoint a nominee director is provided under the SEBI (Debenture Trustees) regulations.
This initiative by SEBI underscores its commitment to enhancing transparency and providing clear regulatory frameworks for REITs and InvITs, thus fostering a more investor-friendly environment. By inviting public comments, SEBI aims to incorporate diverse perspectives and ensure that the amendments effectively address the concerns and needs of market participants.
SEBI has set a deadline of July 29 for submitting comments and suggestions on the draft circulars. This window allows stakeholders ample time to review the proposed changes and provide their input, ensuring a comprehensive and well-rounded regulatory update that aligns with the interests of both the market and the investors.
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