SECURITIES AND EXCHANGE BOARD OF INDIA
Mumbai, the 14th February, 2023
SECURITIES AND EXCHANGE BOARD OF INDIA (INFRASTRUCTURE INVESTMENT TRUSTS) (AMENDMENT) REGULATIONS, 2023
No. SEBI/LAD-NRO/GN/2023/122.—In exercise of the powers conferred under section 30 read with section 11 and section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014, namely: –
1. These regulations may be called the Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2023.
2. They shall come into force on the date of their publication in the Official Gazette:
Provided that sub-regulation (1) and (6) of regulation 3 of these regulations shall come into force with effect from April 1, 2023.
3. In the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014, ─
(1) In regulation 2, in sub-regulation (1), –
(a) clause (g) shall be substituted with the following clause, namely, –
“(g) “Change in control” –
(i) in case of a body corporate –
(A) if its shares are listed on any recognised stock exchange, shall be construed with reference to the definition of control in terms of regulations framed under clause (h) of sub-section (2) of section 11 of the Act;
(B) if its shares are not listed on any recognised stock exchange, shall be construed with reference to the definition of control as provided in sub-section (27) of Section 2 of the Companies Act, 2013 (18 of 2013);
(ii) in a case other than that of a body corporate, shall be construed as any change in its legal formation or ownership or change in controlling interest.
Explanation – For the purpose of sub-clause (ii), the expression “controlling interest” means an interest, direct or indirect, to the extent of not less than fifty percent of voting rights or interest;”;
(b) after clause (sa), the following clause shall be inserted, namely, –
“(saa)“Independent director” in case of a company means a director, other than a nominee director of the investment manager: –
(i) who, in the opinion of the Board of Directors of the investment manager, is a person of integrity and possesses relevant expertise and experience;
(ii) who is not or was not the promoter of parties to the InvIT, its holding company, the subsidiary or associate;
(iii) who is not related to the InvIT, its Holdco and/or SPV, parties to the InvIT, its holding company, the subsidiary or associate or their promoters or directors;
(iv) who, apart from receiving director’s remuneration, does not have any or has had no material pecuniary relationship with the InvIT, its Holdco and/or SPV, parties to the InvIT, its holding company, the subsidiary or associate or their promoters or directors, during the three immediately preceding financial years or during the current financial year;
(v) none of whose relatives-
(A) is holding securities of or interest in the InvIT, its Holdco and/or SPV, , parties to the InvIT, their holding Company, subsidiary or associate during the three immediately preceding financial years or during the current financial year of face value in excess of fifty lakh rupees or two percent of the unit capital of the InvIT, two percent of the paid-up capital of the parties to the InvIT, their holding Company, subsidiary or associate or Holdco and/or SPV respectively or such higher sum as may be specified;
(B) is indebted to the InvIT, its Holdco and/or SPV, parties to the InvIT, its holding company, subsidiary or associate or their promoters or directors, during the three immediately preceding financial years or during the current financial year in excess of such amount as may be specified;
(C) has given a guarantee or provided any security in connection with the indebtedness of any third person to the InvIT, its Holdco and/or SPV, parties to the InvIT, its holding company, subsidiary or associate or their promoters or directors, during the three immediately preceding financial years or during the current financial year for such amount as may be specified; or
(D) has any other pecuniary transaction or relationship with the InvIT, its Holdco and/or SPV, parties to the InvIT, its holding company, subsidiary or associate amounting to two percent or more of its gross turnover or total income:
Provided that the pecuniary relationship or transaction with the InvIT, its holdco or SPV, parties to the InvIT, its holding company, subsidiary or associate or their promoters, or directors in relation to points (A) to (D) shall not exceed two percent of its gross turnover or total income or fifty lakh rupees or such higher amount as may be specified from time to time, whichever is lower.
(vi) who, neither himself or herself, nor whose relative(s) —
(A) holds or has held the position of a key managerial personnel or is or has been an employee of the Holdco and/or SPV, parties to the InvITor its holding, subsidiary or associate or any company belonging to parties to the InvIT in any of the three financial years immediately preceding the financial year in which he/she is proposed to be appointed: Provided that in case of a relative who is an employee other than a key managerial personnel, the restriction under this clause shall not apply for his/her employment;
(B) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he/she is proposed to be appointed, of-
(1) a firm of auditors or company secretaries in practice or cost auditors of the InvIT, its Holdco and/or SPV, parties to the InvIT, its holding company, subsidiary or associate; or
(2) any legal or a consulting firm that has or had any transaction with the InvIT, its Holdco and/or SPV, parties to the InvIT, its holding company, subsidiary or associate amounting to ten per cent or more of the gross turnover of such firm;
(C) holds together with his relatives two per cent or more of the total voting power of the InvIT, its Holdco and/or SPV, parties to the InvIT;
(d) is a chief executive or director, by whatever name called, of any non- profit organisation that receives twenty-five per cent or more of its receipts or corpus from the InvIT, its Holdco and/or SPV, parties to the InvIT, its holding company, subsidiary or associate, any of its promoters, directors or that holds two per cent or more of the total voting power of the InvIT, its Holdco and/or SPV parties to the InvIT;
(e) is a material supplier, service provider or customer or a lessor or lessee of the InvIT, its Holdco and/or SPV, parties to the InvIT, its holding company, subsidiary or associate;
(vii) who is not less than 21 years of age; or
(viii) who possesses such other qualifications as may be specified by the Board;”;
(C) after clause (zx), the following clause shall be inserted, namely,-
“(zxa) “Senior Management” means the officers and personnel of the investment manager who are members of its core management team, excluding the Board of Directors, and shall also comprise all members of the management, one level below the Chief Executive Officer or Managing Director or Whole Time Director or manager (including Chief Executive Officer and manager, in case they are not part of the Board of Directors) and shall specifically include the Compliance Officer and Chief Financial Officer;”;
(2) in regulation 10,
a. sub-regulation (6) shall be substituted with the following, namely –
“(6) Subject to the provisions of this chapter, the investment manager of the InvIT shall appoint an individual or a firm as the auditor, who shall hold office from the date of conclusion of the annual meeting in which the auditor has been appointed till the date of conclusion of the sixth annual meeting of the unitholders in accordance with the procedure for selection of auditors, as may be specified by the Board.”
b. after sub-regulation (6), the following sub-regulation shall be inserted, namely –
“(6A) The investment manager of the InvIT shall not appoint or re-appoint—
(a) an individual as the auditor for more than one term of five consecutive years; and
(b) an audit firm as the auditor for more than two terms of five consecutive years: Provided that—
(i) the individual auditor who has completed the term under clause (a) shall not be eligible for re-appointment as the auditor in the same InvIT for a period of five years from the date of completion of the term;
(ii) the audit firm that has completed its term under clause (b), shall not be eligible for reappointment as the auditor in the same InvIT for a period of five years from the date of completion of its term.”
(3) in regulation 13, in sub-regulation (2), after sub-clause (d), the following sub-clause shall be inserted, namely –
“(e) The auditor shall undertake a limited review of the audit of all the entities or companies whose accounts are to be consolidated with the accounts of the InvIT as per the applicable Indian Accounting Standards (Ind AS) and any addendum thereto as defined in Rule 2 (1) (a) of the Companies (Indian Accounting Standards) Rules, 2015, in such manner as may be specified by the Board.”
(4) in regulation 18, in sub-regulation 6, after sub-clause (d), the following sub-clause shall be inserted, namely –
“(e) any amount remaining unclaimed or unpaid out of the distributions declared by a InvIT in terms of sub-clause (c), shall be transferred to the ‘Investor Protection and Education Fund’ constituted by the Board in terms of section 11 of the Act, in such manner as may be specified by the Board.”
(5) in regulation 20, under sub-regulation (2), the following explanations shall be inserted, namely –
“Explanation 1. – Investment by InvITs in overnight mutual funds, characterized by their investments in overnight securities, having maturity of one day, shall be considered as cash and cash equivalent. Explanation 2. – The amount of cash and cash equivalent shall be excluded from the value of the assets of the InvIT.”
(6) after Chapter VIA, and before Chapter VII, the following chapter shall be inserted, namely-
“CHAPTER VIB
OBLIGATIONS OF THE INVESTMENT MANAGERS
Application of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
26G. Subject to other provisions of this Chapter, the provisions contained in sub-regulations (2), (4), (5), (9) and (10) of regulation 17 and regulations 18, 19, 20, 21, 26 and sub- regulation (1), (2), (2A), (3), (4), (5), (7), (8), (9), (10) and (11) of regulation 25 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 shall be applicable, as in force from time to time, with necessary modifications as if the said provisions were the provisions of these regulations.
Explanation – For the purposes of this regulation, unless the context otherwise requires, the provisions under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, shall be interpreted as under, –
(i) the expression “promoters” wherever it occurs, shall be read as “parties to the InvIT”;
(ii) the expression “listed entity” wherever it occurs, shall be read as “InvIT” or “investment manager of InvIT”, as may be applicable;
(iii) the expression “company secretary” wherever it occurs, shall be read as “compliance officer”;
(iv) the expression “executive director” wherever it occurs, shall be read as “non-independent director”;
(v) the expression “non-executive director” wherever it occurs, shall be read as “independent director”;
(vi) the expression “Board of Directors of the listed entity” wherever it occurs, shall be read as “Board of Directors of investment manager”;
(vii) the expression “subsidiary of listed entity” wherever it occurs, shall be read as “HoldCo and/or SPV of InvIT, as applicable”.
Additional Requirements.
26H. (1) The Board of Directors of the investment manager shall comprise of not less than six directors and have not less than one woman independent director.
(2) The quorum for every meeting of the Board of Directors of the investment manager shall be one-third of its total strength or three directors, whichever is higher, including at least one independent director.
Explanation – The participation of the directors by video conferencing or by other audio-visual means shall be counted for the purpose of quorum and shall be recorded by the investment manager.
(3) The Board of Directors of the investment manager shall review compliance reports every quarter pertaining to all laws applicable to the InvIT as well as steps taken to rectify instances of non-compliances.
(4) The minimum information to be placed before the Board of Directors shall include the items specified in Part A of Schedule VII.
(5) The chief executive officer, the chief financial officer and the compliance officer shall provide the compliance certificate, along with the supporting documents, to the Board of Directors including the items specified in Part B of Schedule VII.
(6) The Board of Directors of the investment manager shall set forth clearly the recommendation of the investment manager in the notice to the unitholders for each item referred to in sub-regulation (5) of regulation 22 of these regulations.
Vigil Mechanism
26I. (1) The investment manager shall formulate a vigil mechanism, including a whistle blower policy for directors and employees to report genuine concerns.
(2) The vigil mechanism shall provide for adequate safeguards against victimization of director(s) or employee(s) or any other person who avail the mechanism and also provide for direct access to the chairperson of the audit committee in appropriate or exceptional cases.
(3) An independent service provider may be engaged by the investment manager for providing or operating the vigil mechanism who shall report to the audit committee.
(4) The audit committee shall review the functioning of the vigil mechanism.
Secretarial Compliance Report
26J. The investment manager shall submit a secretarial compliance report given by a practicing company secretary to the stock exchanges, in such form as specified, within sixty days from end of each financial year. (2) The secretarial compliance report referred to in sub-regulation (1) of this regulation shall be annexed with the annual report of the InvIT.
Quarterly Compliance Report on Corporate governance
26K. (1) The investment manager shall submit a quarterly compliance report on governance in the format as may be specified by the Board, to the recognized stock exchange(s) within twenty-one days from the end of each quarter.
(2) The report referred in sub-regulation (1) of this regulation shall be signed either by the compliance officer or the chief executive officer of the investment manager.”
(7) After Schedule VI, the following Schedule shall be inserted namely, –
“SCHEDULE VII: GOVERNANCE NORMS
PART A: MINIMUM INFORMATION TO BE PLACED BEFORE BOARD OF DIRECTORS OF THE
INVESTMENT MANAGER
[See Regulation 26H (4)]
The following minimum information to be placed before Board of Directors of the investment manager:
(a) Annual operating plans and budgets and any updates.
(b) Capital budgets and any updates.
(c) Quarterly results for the investment manager and its operating divisions or business segments.
(d) Minutes of meetings of audit committee and other committees of the Board of Directors.
(e) The information on recruitment and remuneration of senior officers just below the level of Board of Directors, including appointment or removal of Chief Financial Officer and the Compliance Officer.
(f) Show cause, demand, prosecution notices and penalty notices, which are materially important.
(g) Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems.
(h) Any material default in financial obligations to and by the InvIT, HoldCo. and/or SPV.
(i) Any issue, which involves possible public or product liability claims of substantial nature, including any judgement or order which, may have passed strictures on the conduct of the investment manager or taken an adverse view regarding another enterprise that may have negative implications on the investment manager.
(j) Details of any joint venture or collaboration agreement.
(k) Significant labour problems and their proposed solutions, any significant development in Human Resources/ Industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement Scheme etc.
(l) Sale of investments, HoldCo. and/or SPV, assets which are material in nature and not in normal course of business.
(m) Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks of adverse exchange rate movement, if material.
(n) Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as non-payment of dividend, delay in share transfer etc.
(o) Reports of tabletop exercises or workshops for identifying risks and vulnerabilities, and specifying risk mitigations and processes for addressing vulnerabilities.
PART B: COMPLIANCE CERTIFICATE
[See Regulation 26H (5)]
The following compliance certificate shall be furnished by Chief Executive Officer, Chief Financial Officer and Compliance Officer shall state that:
(a) They have reviewed financial statements and the cash flow statement for the year and that to the best of their knowledge and belief:
(1) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;
(2) these statements together present a true and fair view of theInvIT’s affairs and are in compliance with existing accounting standards, applicable laws and regulations.
(b) There are, to the best of their knowledge and belief, no transactions entered into by the investment manager on behalf of InvIT during the year which are fraudulent, illegal or violative of the code of conduct.
(c) They accept responsibility for establishing and maintaining internal controls for financial reporting and that they have evaluated the effectiveness of internal control systems of the investment manager pertaining to financial reporting and they have disclosed to the auditors and the audit committee, deficiencies in the design or operation of such internal controls, if any, of which they are aware and the steps they have taken or propose to take to rectify these deficiencies.
(d) They have indicated to the auditors and the Audit committee
(1) significant changes in internal control over financial reporting during the year;
(2) significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and
(3) instances of significant fraud of which they have become aware and the involvement therein, if any, of the management or an employee having a significant role in the investment manager’s internal control system over financial reporting of InvIT.”
BABITHA RAYUDU, Executive Director
[ADVT.-III/4/Exty./610/2022-23]
Footnotes:
1. The Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 was published in the Gazette of India on September 26, 2014 vide No. LAD-NRO/GN/2014-15/10/1577.
2. The Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 was subsequently amended by the –
(i) Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016,, vide No. SEBI/LAD/NRO/GN/2016-17/021, with effect from November 30, 2016.
(ii) Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2017, vide No. SEBI/LAD-NRO/GN/2017-18/024, with effect from December 15, 2017.
(iii) Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2018, vide No. SEBI/LAD-NRO/GN/2018/07, with effect from April 10, 2018.
(iv) Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2019, vide No. SEBI/LAD-NRO/GN/2019/10, with effect from April 22, 2019.
(v) Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2020, vide No. SEBI/LAD-NRO/GN/2020/05, with effect from March 02, 2020.
(vi) Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020, vide No. SEBI/LAD-NRO/GN/2020/10, with effect from April 17, 2020.
(vii) Securities and Exchange Board of India (Infrastructure Investment Trusts) (Second Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/15, with effect from June 16, 2020.
(viii) Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/27, with effect from July 30, 2021.
(ix) Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/30., with effect from August 31, 2021.
(x) Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/83, with effect from May 4, 2022.
(xi) Securities and Exchange Board of India (Infrastructure Investment Trusts) (Second Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/101 with effect from January 1, 2023.
