SEBI is thinking about a structure for sponsor issuance of subordinate units by REITs and InvITs

 SEBI is thinking about a structure for sponsor issuance of subordinate units by REITs and InvITs

SEBI is thinking about a structure for sponsor issuance of subordinate units by REITs and InvITs

Furthermore, a framework for Unit-Based Employee Benefits (UBEB) in the context of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) has been recommended by the regulator.

The public is encouraged to provide feedback on the suggestions by December 29th, according to the Securities and Exchange Board of India (SEBI).

The capital markets regulator, Sebi, is thinking of implementing a structure that would allow sponsors and their affiliates to issue REIT and InvIT subordinate units.

Furthermore, a framework for Unit-Based Employee Benefits (UBEB) in the context of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) has been recommended by the regulator.

The public is encouraged to provide feedback on the suggestions by December 29th, according to the Securities and Exchange Board of India (SEBI).

Only the sponsor, its affiliates, and the sponsor group may be issued subordinate units under the proposed structure. These units may be offered to qualifying organizations in the original offer or in any Can, and they may only have less voting rights than regular units. According to SEBI's consultation document, the offer is a follow-up to the first offer.

It also implied that transfers of subordinate units could only occur between organizations that sponsored them. "After the original offer, 75% of the unitholders by value must first approve any issue of subordinate units. No one connected to the transaction, including the sponsor, sponsor group, and affiliates, will vote on it. Matters," the SEBI proposed.

The regulator recommended that common and subordinated units be issued under different ISINs and that these units not be taken into account when determining the minimum unitholding criteria that sponsors must meet.

It also suggested that the offer document should explicitly identify and specify the eligibility date as well as the performance standard for the conversion of subordinate units into regular units.

In addition, with specific restrictions, a one-time extension of the qualifying date should be permitted for a maximum of one year.

According to SEBI, there should be a one-year minimum lag between the issuing of subordinated units and the eligibility date or event for the conversion of subordinated units into normal units.

Only sponsors and affiliates are permitted to receive subordinate units from REITs and InvITs under current regulations. But there isn't a structure outlining how subordinate units are released.

Regarding unit-based employee benefits, SEBI has suggested that investment managers of InvITs and managers of REITs may provide UBEB schemes to their staff members according to the units of the InvIT or REIT.

The management of the REIT or the investment manager of the InvIT may establish a separate Employee Benefit Trust (EB Trust) to carry out the plan.

Only the restricted use of unit-based employee benefits shall be made of the units owned by the EB Trust. The only transaction the EB Trust should undertake with its REIT/InvIT units is to provide unit-based benefits to the Manager's or Investment Manager's staff.

Because of the REIT/InvIT assets he owns, the EB Trust trustee shouldn't be able to cast a vote. To ensure transparency on reputable stock exchanges, EB Trust's unitholding should be represented as "non-sponsor and non-public" unitholding.

SEBI's PFUTP (Prohibition of Fraudulent as well as Unfair Trading Practices) Rules on Insider trading is should be applied to the Manager/Investment Manager, its directors, key staff, and EB Trust beneficiaries in addition to UBEB beneficiaries.