Sebi, the capital markets regulator, is working on a framework for REITs and InvITs to issue subordinate units to sponsors and their partners. Furthermore, the regulator has recommended a framework for unit-based employee benefits (UBEB) in the context of REITs and InvITs (infrastructure investment trusts).
The Securities and Exchange Board of India (Sebi) has requested public feedback on the suggestions by December 29.According to the proposed framework, subordinate units can only be issued to the sponsor, its associates, and the sponsor group, such units should have inferior voting to ordinary units, and the units can be issued to eligible entities in the initial offer or any subsequent offering, Sebi said in its consultation paper.It went on to say that subordinate units could only be transferred between sponsor corporations.
"Any issuance of subordinate units following the initial offer requires prior approval from 75% of the unitholders by value." "The sponsor(s), sponsor group, associates of the sponsor(s), and any other parties involved in the transaction shall not vote on such matters," Sebi proposed.
The regulator advised that subordinate units and ordinary units be issued under distinct ISINs and that such units be excluded from the obligatory minimum unitholding criteria that apply to sponsors.It further suggested that the entitlement date, as well as the performance criterion for converting subordinate units to ordinary units, be properly stated and mentioned in the offer agreement.
Furthermore, a one-time extension of the eligibility date for a maximum of one year should be authorized under specified conditions."The minimum time gap between issuance of subordinate units and entitlement date / event for conversion of subordinate units to ordinary units shall be one year," Sebi said in a statement.
Only the sponsors and associates of REITs and InvITs are permitted to receive subordinate units under the present rules. There is, however, no framework outlining the method for issuing subordinate units.Sebi has proposed that the manager of a REIT or the investment manager of an InvIT offer UBEB schemes to their employees based on the units of the REIT or InvIT.The scheme should be implemented through a separate Employee Benefit Trust (EB Trust), which can be established by the manager of a REIT or the investment manager of an InvIT.
EB Trust's units should be used only for the purpose of providing unit-based employee benefits. Except for delivering unit-based benefits to employees of the management or investment manager, the EB trust should not transfer or sell units of REIT/InvIT held by it.The trustee of the EB Trust should not be allowed to vote because it owns REIT/InvIT units.
The unitholding of the EB Trust should be disclosed to the recognised stock exchange as "non-sponsor and non-public" unitholding.Insider trading PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) guidelines should apply to the manager / investment manager, its directors, key managerial people, UBEB grantees, and EB Trust.
