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Published on 6 April 2025

Understanding SEBI's Recent REITs Board Nomination Amendments

Overview of Recent Amendments to REITs Board Nomination Rights

On August 6, 2024, the Securities and Exchange Board of India (SEBI) issued a circular amending the Master Circular for Real Estate Investment Trusts (REITs). This amendment clarifies the board nomination rights of REIT unitholders.

Key Amendments & Clarifications

  • Unitholder Nominee Director Rights: According to Paragraph 18.2.2(b) of Chapter 18, eligible unitholders who exceed a specified unitholding threshold may nominate one Unitholder Nominee Director. However, if an entity has the right to nominate a director as a shareholder or lender to the Manager or REIT, they will not be eligible to nominate a director as a unitholder.

  • Industry Concerns Addressed: Market participants sought clarification regarding the overlap of nomination rights for unitholders who also function as lenders. In response, SEBI, acknowledging industry feedback and a recommendation from the Hybrid Securities Advisory Committee (HySAC), added a proviso. This states that the nomination restriction does not apply if the right to nominate is granted under Regulation 15(1)(e) of the SEBI (Debenture Trustees) Regulations, 1993.

Implementation Details

  • Effective Date: The amendment takes effect immediately and aims to streamline processes for REITs.

  • Issuance Authority: The circular is issued under the authority of Section 11(1) of the SEBI Act, 1992, and Regulation 4(2)(g) of the SEBI (REITs) Regulations, 2014.

  • Communication of Changes: Recognized stock exchanges are directed to make this information available on their websites. Furthermore, the details are accessible on SEBI’s official site under the "Legal" section.

Full Circular Reference

Amendment to Master Circular for Real Estate Investment Trusts (REITs) dated May 15, 2024 – Board nomination rights to unitholders of REITs

  1. Nomination Rights: Paragraph 18.2.2(b) comments upon the nomination rights:

    "(b) Eligible Unitholder(s) shall be entitled to nominate only one Unitholder Nominee Director, provided their unitholding exceeds the defined threshold. If the right to appoint one or more directors on the Board of Directors of the Manager is available to an entity (or to an associate) in the capacity of shareholder of the Manager or as a lender to the Manager or the REIT (including its HoldCo(s) or SPVs), such an entity shall not have the right to nominate as a unitholder."

  2. Clarification Request by Market Participants: There was a need for clarity relating to unitholders who are also lenders regarding nomination rights.

  3. Proposed Proviso: To promote ease of doing business and based on industry requests, we propose to insert the following proviso in Paragraph 18.2.2(b):

    "Provided that the restriction on the right to nominate a Unitholder Nominee Director shall not apply where such a right exists as per clause (e) of sub-regulation (1) of regulation 15 of the SEBI (Debenture Trustees) Regulations, 1993."

  4. Effective Immediately: This circular is effective immediately.

  5. Legal Authority: This circular is issued under the powers of Section 11(1) of the Securities and Exchange Board of India Act, 1992 and Regulation 4(2)(g) of the SEBI (Real Estate Investment Trusts) Regulations, 2014 with the approval of the competent authority.

  6. Stock Exchanges Instruction: Recognized Stock Exchanges must disseminate this Circular on their respective websites.

  7. Availability: The Circular is available on the SEBI website at sebi.gov.in under the “Legal” category within the “Circulars” dropdown.

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