SEBI on 16th August, 2023 has published the Securities and Exchange Board of India (Real Estate Investment Trusts) (Second Amendment) Regulations, 2023. The provisions now allow unitholders holding at least ten percent of the total outstanding units to nominate a director on the board of directors of the Manager. This emphasizes the principle of shared governance and ensures that significant stakeholders have a say in the decision-making process.
Furthermore, the requirement for compliance with a stewardship code, as specified in Schedule IX, adds a layer of responsible ownership. Unitholders with substantial holdings are now obligated to act in the best interests of the REIT and its unitholders, formulate stewardship policies, manage conflicts of interest, and periodically monitor and intervene when necessary. These provisions underscore the importance of actively engaging in the stewardship of their investments.
The amendments also address sponsor involvement and minimum unit holding requirements. The regulation now mandates that the sponsor(s) and sponsor group(s) collectively hold a specified percentage of units for varying periods, ensuring a sustained commitment to the REIT’s success. These provisions create a dynamic balance between the interests of sponsors and the long-term viability of the REIT.
Another critical aspect covered by the amendments is the transition of a Manager to a Self-Sponsored Manager. The conditions ensure a seamless conversion process, requiring the outgoing sponsor(s) to meet stringent criteria. This safeguards the REIT’s stability during the transition while promoting ethical practices.