In a bid to foster ease of doing business and ease the process of acquisition of units by employee benefit trusts (EBTs) for subsequent transfer of such units to employees of Infrastructure Investment Trusts (InvITs) and Real Estate Infrastructure Trusts (REITs) under unit based employee benefit schemes, the Securities and Exchange Board of India (SEBI) vide two separate circulars dated November 13, 2024 (SEBI Circulars) has amended master circulars for InvITs and REITs dated May 15, 2024 (Master Circulars) to grant relaxations from lock-in and allotment restrictions for units allotted to EBTs.
Additionally, modifications have been made to Master Circulars to align the timelines for making distributions to unitholders as provided under the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 (InvITs Regulations) and Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 (REITs Regulations) besides introducing a standardized format for quarterly reports and compliance certificates to be filed by managers of the trusts with the concerned trustees.
Key highlights of the SEBI Circulars are outlined below:
- Relaxation from lock-in and allotment restrictions for units issued to EBTs:
Units of InvITs and REITS allotted to EBTs under unit based employee benefit schemes (UBEB Scheme) are exempt from lock-in restrictions (i.e. 1 year lock-in applicable to sponsor groups) and allotment-related restrictions (i.e. preferential issue of units to person that have transferred units allotted within the period of 90 days preceding the trading days).
- Standardized formats for quarterly reports and compliance certificates:
To achieve consistency in regulatory reporting, SEBI has directed Bharat InvITs Association and the Indian REITs Association to prepare and specify standardized formats for quarterly reports and compliance certificates required to be submitted by the managers of InvITs and REITs with the concerned trustees. These formats are to published by the aforesaid associations on their respective websites and any subsequent changes to the formats can be undertaken in consultation with SEBI.
- Alignment of timelines for making distributions by InvITs and REITs:
Distributions to unitholders are required to be undertaken within 5 days (rather than the earlier timeline of 15 days) from the record date. Managers are required to transfer unclaimed amounts held by trusts to an escrow account held in a scheduled bank called an ‘Unpaid Distribution Account’ within seven working days from the expiry of the revised distribution timelines. The transfer of distribution funds to an escrow account has been contemplated for cases where funds remain unclaimed or unpaid owing to a variety reasons, including failure by unitholders to update their account details.
Conclusion:
These amendments are expected to enhance operational efficiency in allocation of units under UBEB Schemes and achieve transparency and uniformity in quarterly and compliance reporting by managers of InvITs and REITs.