Unitholders holding 10% or more of the outstanding units of an Infrastructure Investment Trust (InvIT) or a Real Estate Investment Trust (REIT), either individually or collectively, have the right to nominate one nominee director to the board of the investment manager / manager, as the case may be. However, entities (or their associates) entitled to such board nomination rights by virtue of being shareholders of the manager or lenders to the: (a) manager; or (b) InvIT or REIT (or their holding company(ies) or special purpose vehicles (SPVs)) could not enjoy board nomination rights as available to other unitholders of the REIT or InvIT.

On August 6, 2024, the Securities and Exchange Board of India (SEBI) amended the master circulars for InvITs and REITs dated May 15, 2024 to allow exercise of board nomination rights in the capacity of unitholders if such entities as lenders are entitled to appoint a nominee director under Regulation 15(1)(e) of the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993. A debenture trustee is required to appoint a nominee director to the board of a company in case of: (a) two consecutive defaults in payment of interest to debenture holders; (b) default in creating security for debentures; or (c) default in redeeming debentures, by the issuing company.

Conclusion

It is interesting to see SEBI accommodating specific requests and comments from market participants and reinstating board nomination rights permitted to entities under associated SEBI regulations.  

Authors & Contributors

Partner:

Dhruv Chatterjee

 

Associate(s):

Prachi Yadav

Ridima Gupta