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New Delhi: In order to strengthen the rules of governance, the market regulator… SEBI on Tuesday proposed special rights for the unit holders of REIT And InvITs By conferring the right to nominate representatives on the boards. Also, the regulator has suggested the concept of self-sponsored real estate investment trust (REIT) or Infrastructure Investment Trust (InvIT), according to a consultation paper.
simultaneously, SEBI has proposed that on the Board of Directors of investment manager of REIT and InvIT, the principles of Stewardship Code should apply to the members nominated by the unitholders.
The proposed move will empower the unit holders REIT And InvITs To monitor their investments in REIT/InvIT and assist in decision making.
The Securities and Exchange Board of India (SEBI) has sought public comments on the proposals by May 29.
REITs and InvITs were introduced in India to provide investors with an opportunity to get exposure to real estate and infrastructure projects respectively with diversification of risks through pooling arrangements.
Generally, REITs invest predominantly in completed and leased real estate assets. Privately held InvITs can invest in properties under construction as well as completed and revenue generating properties and public InvITs can invest predominantly in completed and revenue generating properties.
In its consultation paper, SEBI said that special or differential rights in the form of board nomination rights are proposed to be given to certain investors through an offer document.
It is submitted that such rights are required by investors because of the large ticket size of investments and the need to exercise some control over the operations of the REIT/InvIT.
Accordingly, the regulator has suggested for special rights such as the right to nominate directors on the board of the manager/investment manager of the REIT or InvIT.
However, at present the REIT and InvIT rules do not explicitly provide for granting such special or additional rights.
It has been proposed that any unitholder holding a minimum of 10 per cent units for every ten per cent held may be entitled to nominate one director on the board of the manager/investment manager.
In order to avoid creation of a very large Board on account of nomination of directors by unitholders on the Board of Investment Managers, SEBI has proposed an alternative option for participation of unitholders in the decision-making process, consisting of a separate body with members nominated by the unitholders. Unit holders council has been constituted. Minimum ten percent units.
The regulator has proposed to introduce a framework for self-sponsored REIT/InvIT. This will create a space for mature and independently professionally managed managers to emerge and provide another exit option for the sponsor.
This would be in addition to the exit option through change of sponsor currently envisaged in the REIT and InvIT rules.
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