Converting a Privately Placed InvIT into a Publicly offered InvIT: Is Trust Deed Ready?

Converting a Privately Placed InvIT into a Publicly offered InvIT: Is the Trust Deed Ready?

Summary: Conversion of a privately placed Infrastructure Investment Trust into a publicly offered InvIT is a significant structural change involving public retail unitholders, stricter regulatory oversight and additional compliance requirements. Although SEBI’s August 8, 2025 circular streamlined the conversion framework, aligned the procedure and disclosures with a follow-on offer and removed the 15% minimum sponsor contribution requirement and associated lock-ins, it did not address the InvIT’s trust deed. As the charter document governing the rights, duties and relationships among the trustee, sponsor, investment manager and unitholders, the trust deed must be examined before conversion. Provisions restricting advertisements or public issues, permitting issuance only through a placement memorandum, limiting transferability of units or prescribing the number of unitholders may require amendment or deletion. The deed may also need provisions addressing half-yearly distribution of net distributable cashflows and valuation of assets, structural changes involving sponsors, investment managers or the SPV/HoldCo structure, and stronger governance, investor grievance and communication mechanisms. Neither the InvIT Regulations nor the Indian Trust Act 1882 expressly prescribes the process for amending the deed. Consequently, amendments must generally follow the procedure and approval requirements contained in the deed itself. Amendments affecting unitholder rights or liabilities ordinarily require unitholder approval. Restrictive provisions should preferably be amended before filing the draft offer document with SEBI, and recent conversions have sought approval for the amendment and conversion through the same postal ballot.

Introduction

SEBI’s August 8, 2025 circular revised the conversion framework, streamlining minimum sponsor contribution requirements and aligning the procedure and disclosure requirements for conversion with those of a follow-on offer, and removed the 15% minimum sponsor contribution requirement and its associated lock-ins. SEBI’s August 2025 reforms have made the regulatory path to conversion considerably smoother — but they leave the constitutional document of the InvIT untouched.

By setting out the rights, duties and relationships among the trustee, sponsor, investment manager and unitholders, the trust deed serves as the charter document of an Infrastructure Investment Trust “InvIT”. As the foundation on which the InvIT operates, the trust deed plays an important role in preventing disputes and facilitating their resolution. In situations of regulatory silence or ambiguity, the trust deed also serves as an important guiding document.

Conversion of privately placed InvIT into publicly offered InvIT is a major structural change in the life cycle of an InvIT. Public retail unitholders get involved and the InvIT is subjected to stricter regulatory oversight with additional compliance requirements. Along with the regulatory procedure, such conversion may also warrant amendment in the clauses of trust deed. This article discusses the key amendments required in the trust deed at the time of conversion.

Requirement of amendment to trust deed

As the charter document of an InvIT, the trust deed may be compared, in a limited sense, to the memorandum and articles of association of a company. Therefore, the InvIT cannot do any act prohibited by the trust deed. Courts have held, in the context of trusts, that an act undertaken outside the scope of the trust deed may be regarded, as general principle, as ultra vires and consequently invalid. For example, if we refer the clauses of trust deeds of privately placed InvITs, it is generally observed that they contain clauses restricting advertising or public issue of units. Hence, if the public issue and conversion are undertaken without amending such restrictive clauses, it could result in the transaction being inconsistent with the governing trust deed and may expose the InvIT and relevant stakeholders to legal and regulatory risks.

The InvIT Regulations and the master circular do not expressly require that the trust deed be amended prior to conversion of a privately placed InvIT to a publicly offered InvIT. However, the clauses of the trust deed must nonetheless be examined.

Clauses to be looked upon

Generally speaking, following clauses, if present in the trust deed of privately placed InvIT, may need deletion or modification.

(a) Restriction on making of advertisement for issue of units:

Since privately placed InvITs do not issue units to the public, their trust deeds may contain provisions restricting advertisements inviting subscriptions to their units. Such a restriction may be appropriate while the InvIT remains privately placed. However, if the InvIT proposes to undertake a public issue of units, the provision should be suitably amended or deleted.

(b) Use of placement memorandum for issue of units:

Privately placed InvITs make issue of units through private placement by issuing a placement memorandum instead of offer document. However, while making public issue of units, it is essential to issue an offer document to public at large. In such a situation, if the trust deed does not allow issue of units through both placement memorandum and/or offer document, then the relevant provision should be amended.

(c) Reviewing restrictions, if any:

Additionally, trust deeds of privately placed InvITs may also contain clauses with respect to any kind of restriction on transfer of units or minimum/maximum number of unitholders etc. Such clauses, if present, need to be suitably amended or deleted in order to facilitate smooth transferability of units following public issue.

(d) Addressing Regulatory requirements:

In addition to modifying existing restrictions, certain provisions may need to be inserted to address the regulatory requirements applicable after the public issue.

For example, in case of publicly offered InvITs, as per Regulations 18(6) and 21(5) of the InvIT Regulations, distribution of net distributable cashflows and valuation of assets has to be undertaken half yearly. But for privately placed InvITs it is to be undertaken once in a financial year. Therefore, while converting from privately placed InvIT to publicly offered InvIT, the conditions relating to half yearly valuation and distribution need to be inserted in clauses relating to distribution and valuation respectively.

(e) Structural or organisational changes accompanying the conversion:

A conversion may also coincide with structural changes to the InvIT, such as induction of an additional sponsor, a change in the investment manager, or reorganisation of the SPV/HoldCo structure. Where such changes accompany the conversion, the trust deed’s clauses on sponsor eligibility, investment manager appointment, or the permitted holding structure should be reviewed to ensure consistency with the revised structure.

(f) Other changes:

Post public issue of units, a large amount of retail investors shall become unitholders of the trust. In order to ensure protection of interest of such retail investors, the InvITs may consider adding some clauses in the trust deed from the point of view of good governance which may help in enhancing & strengthening the investor grievances mechanisms, communication channels. etc.

Further, to encourage wider investor participation, clauses relating to the quorum for unitholder meetings and the minimum voting period for unitholder approvals may also be included..

Approval and Process of amendment of trust deed

Both, the InvIT Regulations and the Indian Trust Act 1882, are silent about the process for amending the trust deed. Therefore, the trust deeds are generally amended as per the process specified in the deed itself. The trust deed of each individual InvIT specifies the process for amendment of the deed. It also specifies the requirement of approval from trustee or sponsor or unitholders (beneficiaries) wherever applicable. Generally speaking, such amendments to trust deeds which impact the rights and/or liabilities of unitholders, require their approval. Since public issue of units dilutes the rights of unitholders, their approval is necessary. Hence the InvITs amend the trust deed with the approval of their unitholders and other process as specified in the amendment clause of the deed.

Appropriate stage for amendment of trust deed

As discussed above, amending the trust deed may involve multiple approvals, documentation and procedural steps. The process should therefore be initiated sufficiently in advance. Any provision that restricts a public issue should ordinarily be amended before the draft offer document is filed with SEBI, so that the constitutional framework of the InvIT is consistent with the transaction presented in the offer document

In recent examples of conversion of InvITs, unitholders approval for amendment of trust deed is taken through same postal ballot which seeks the approval for conversion of privately placed InvIT to publicly offered InvIT.

Conclusion

As the fundamental document of the InvIT, the trust deed has a significant role to play in its structure.. If the clauses of trust deed are restrictive or even silent on any important matter, then it may lead to confusions or litigations. Hence, even if the law is silent, the trust deed should be suitably amended before converting privately placed InvIT in to a publicly offered one. While amending the deed, the care should be taken that the language is unambiguous and all-inclusive.

Authors: CS Jyotika Bhojwani and CS Rutuja Umadikar