SEBI's Updated Framework on Board Nomination for REITs and InvITs
21 Sep 2023
Board Nomination Rights for REITs and InvITs: A New Framework by SEBI
In a recent development, the Securities and Exchange Board of India (SEBI) has introduced a new framework concerning board nomination rights for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). This move has sparked curiosity among investors and stakeholders in the real estate and infrastructure sectors.
SEBI's decision came to light after its board meeting on June 28, where they approved the introduction of nomination rights to unitholders of REITs and InvITs. But who qualifies as an eligible unitholder? An eligible unitholder is defined as one who holds 10 per cent or more of the total outstanding units of a REIT or InvIT. This can be either individually or collectively.
The Framework in Detail
According to the newly issued framework, the manager of a REIT or InvIT is required to review the status of eligible unitholders who have exercised their board nomination rights. Specifically, they need to ensure that these unitholders continue to hold the required number of units of the respective REIT or InvIT. This review process must be completed within 10 days from the end of each calendar month.
Furthermore, the manager is obligated to submit a report to the trustee of the REIT or InvIT in question, detailing their findings from the review.
It's essential to note that while eligible unitholders have the right to nominate someone for the position of unitholder nominee director, it's not a mandatory obligation.
Implications and Takeaways
This streamlined approach by SEBI aims to provide more clarity and structure to the nomination rights process for REITs and InvITs. It ensures that the rights of unitholders are safeguarded while also maintaining transparency in the nomination process.
For investors, this news is a step forward in ensuring that their rights and interests are protected. With clear guidelines in place, the process becomes more transparent and efficient, leading to better trust and confidence in the system.
SEBI's new framework for board nomination rights is a testament to its commitment to enhancing the operational efficiency and transparency of REITs and InvITs in India. As the real estate and infrastructure sectors continue to evolve, such regulatory measures will play a crucial role in shaping their future trajectory.