On August 6, 2024, the Securities and Exchange Board of India (SEBI) issued a circular amending the Master Circular for Infrastructure Investment Trusts (InvITs) dated May 15, 2024, to clarify the board nomination rights of InvIT unitholders. Paragraph 22.3.1(b) of Chapter 22 initially stipulated that eligible unitholders could nominate only one Unitholder Nominee Director, provided their unitholding exceeded a specified threshold. However, if an entity already had the right to nominate a director as a shareholder or lender to the Investment Manager or InvIT, it could not nominate a director as a unitholder. Industry participants requested clarification on overlapping nomination rights for unitholders who are also lenders. To address this, SEBI, following industry requests and the Hybrid Securities Advisory Committee (HySAC) recommendation, added a proviso stating that the restriction does not apply if the nomination right is available under Regulation 15(1)(e) of the SEBI (Debenture Trustees) Regulations, 1993. This amendment aims to ease business operations and is effective immediately. The circular, issued under Section 11(1) of the SEBI Act, 1992, and Regulation 4(2)(h) of the SEBI (InvITs) Regulations, 2014, has been approved by the competent authority. Recognized stock exchanges are instructed to disseminate this information on their websites, and the circular is available on SEBI’s official website under the “Legal” section.
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Securities and Exchange Board of India
Circular No. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2024/109 Dated: August 06, 2024
To,
All Infrastructure Investment Trusts (InvITs)
All Parties to InvITs
All Recognised Stock Exchanges
All Depositories
Madam/Sir,
Sub: Amendment to Master Circular for Infrastructure Investment Trusts (InvITs) dated May 15, 2024 – Board nomination rights to unitholders of InvITs
1. Para 22.3.1. (b) of Chapter 22, titled “Board nomination rights to unitholders of Infrastructure Investment Trusts (InvITs)”, of the Master Circular for Infrastructure Investment Trusts dated May 15, 2024 requires as under:
“(b) Eligible Unitholder(s) shall be entitled to nominate only one Unitholder Nominee Director, subject to the unitholding of such Eligible Unitholder(s) exceeding the specified threshold. If the right to nominate one or more directors on the Board of Directors of the Investment Manager is available to any entity (or to an associate of such entity) in the capacity of shareholder of the Investment Manager or lender to the Investment Manager or the InvIT (or its HoldCo(s) or SPVs), then such entity in its capacity as unitholder, shall not be entitled to nominate or participate in the nomination of a Unitholder Nominee Director.”
2. Market participants have requested to provide clarity on the availability of the right to nominate a director on the Board of Directors of the Investment Manager of InvIT, to a unitholder where such nomination right is also available to a unitholder in the capacity of lender to the Investment Manager or the InvIT (or its HoldCo(s) or SPVs).
3. In order to promote ease of doing business and based on the request of the industry and recommendation of Hybrid Securities Advisory Committee (HySAC), it is proposed to insert the following proviso under paragraph 22.3.1. (b) of Master Circular for Infrastructure Investment Trusts dated May 15, 2024:
“Provided that the above restriction relating to the right to nominate a Unitholder Nominee Director shall not be applicable if the right to appoint a nominee director is available in terms of clause (e) of sub-regulation (1) of regulation 15 of the SEBI (Debenture Trustees) Regulations, 1993.”
4. This circular shall come into force with immediate effect.
5. This circular is being issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 and Regulation 4(2)(h) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014. This circular is issued with the approval of the competent authority.
6. The recognized Stock Exchanges are advised to disseminate the contents of this Circular on their website.
7. This Circular is available on the website of the Securities and Exchange Board of India at sebi.gov.in under the category “Legal” and under the drop down “Circulars”.
Yours faithfully
Ritesh Nandwani
Deputy General Manager
Department of Debt and Hybrid Securities
Tel No.022-26449696
Email id – [email protected]
