On September 26, 2024, the Securities and Exchange Board of India (SEBI) notified the SEBI (Infrastructure Investment Trusts) (Third Amendment) Regulations, 2024 and SEBI (Real Estate Investment Trusts) (Third Amendment) Regulations, 2024 (Amendment Regulations) to foster improved ease of doing business and enable increased investor participation in the real estate and infrastructure sectors.
Key highlights of the Amendment Regulations include:
- Reduction of trading lot of units of privately placed Infrastructure Investment Trusts (InvITs) for the purpose of trading on stock exchanges, from INR 1 crore to INR 25 lakhs.
- Provisions related to change in sponsor under the SEBI (Infrastructure Investment Trusts) Regulations, 2014 have been aligned with corresponding provisions under the SEBI (Real Estate Investment Trusts) Regulations, 2014. Following this alignment, change in sponsor or inducted sponsor in the case of an InvIT (as well as a REIT) can be undertaken on account of entry of a new sponsor or the exit of an existing sponsor.
- Unitholders of InvITs and Real Estate Investment Trusts (REITs) will be able to attend meetings through audio-video conferencing or any other audio-visual means and will be able to e-vote remotely at such meetings (in the manner as may be specified by SEBI).
- Voting threshold will be calculated based on the unitholders present and voting. An explanation to this provision clarifies that the number of unitholders voting through electronic voting facility and postal ballot will be reckoned towards determining the total number of unitholders present and voting.
- Manager of an InvIT or REIT may convene a meeting of unitholders at shorter notice (i.e. notice of less than 21 days as required by the principal regulations) subject to obtaining consent (in writing or through electronic mode) from at least 95% of unitholders in case of an annual meeting and in case of any other meeting, consent of majority of the unitholders.
- Voting count will be determined in percentage terms (i.e. 50% or 60%, as the case may be) instead of using proportionate terms (i.e. ‘more than the votes cast against’ or ‘not be less than one and a half times the votes cast against’).
- Managers of InvITs and REITs need to ensure that adequate backup systems, data storage capacity, system capacity for secure handling and transfer of data are maintained for maintenance of records electronically. Additionally, managers are obligated to maintain reliable arrangements for alternative means of communication in case of internet failure, formulate a business continuity plan and have a disaster recovery site in place for electronic records to ensure transaction integrity at all times.
- The timeline for payment of distributions by InvITs / REITs and their holding companies and / or special purpose vehicles has been revised to five working days (from the erstwhile timeline of 15 working days) from the record date. The record date shall be the date which is two working days from the date of declaration of distributions, excluding the date of declaration and the record date. This amendment will be effective from November 26, 2024.
Conclusion
These Amendment Regulations have been notified following receipt of specific approval from SEBI at its board meeting held on June 27, 2024, and are intended to introduce ease doing business measures in the framework for InvITs and REITs.