FCC

SEBI Eases Rules for Nomination Rights in REITs and InvITs

2024-08-12

To enhance the ease of doing business, the Securities and Exchange Board of India (SEBI) has revised the nomination rights framework for unitholders of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). The updated regulations, effective immediately, clarify the conditions under which unitholders can appoint directors to the boards of these investment vehicles.

Previously, unitholders who exceeded a specific ownership threshold could nominate one director to the board of the REIT's or InvIT's Manager. However, entities with existing rights to nominate directors as shareholders or lenders were restricted from using their unitholder status for additional nominations.

SEBI has now introduced an exception to this rule. According to the new circulars, unitholders can nominate a director if the right arises from conditions specified in the SEBI (Debenture Trustees) Regulations, 1993, such as defaults on payments or security creation. This change addresses requests from market participants seeking clarity on the overlapping nomination rights of unitholders who are also lenders.

REITs offer investors opportunities to invest in commercial real estate, while InvITs provide access to a portfolio of infrastructure assets. The revised framework aims to streamline governance and provide greater flexibility for investors in these sectors.