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SEBI Introduces Framework for Unclaimed REIT and InvIT Amounts

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SEBI has responded to instances of unclaimed or unpaid distribution amounts in Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), and funds in escrow accounts of non-company listed entities. A comprehensive procedural framework, outlining a uniform claim process and the transfer of such amounts to the Investor Protection and Education Fund (IPEF), will be effective from March 1, 2024, according to 3 separate SEBI circulars.

Regulation 18(6)(b) of the SEBI (REITs) Regulations, 2014, mandates a minimum distribution of 90% of Net Distributable Cash Flows (NDCFs) to REIT unitholders, with distributions occurring at least once every 6 months. To address unclaimed amounts, SEBI introduced Regulation 18(6)(f), directing the transfer to the IPEF and amending related regulations.

The outlined procedure involves two parts: Part 1 deals with the Manager transferring unclaimed amounts to the Escrow Account/Unpaid Distribution Account of the REIT, while Part 2 addresses the subsequent transfer from the Unpaid Distribution Account to the IPEF.

If distribution amounts remain unpaid or unclaimed for 15 days after the Manager’s declaration, they must be transferred to the Unpaid Distribution Account within 7 days. In cases of default, a 12% per annum interest rate applies. A nodal officer is appointed for unitholders, and a robust internal policy for claiming unpaid amounts is essential. The Manager must verify claims, and rejected claims do not prevent unitholders from filing fresh ones. Payments must be remitted within 30 days.

Transfers from the Unpaid Distribution Account to the IPEF must occur within 30 days after 7 years. Penalties for defaulting Managers are outlined, ensuring accountability. REITs must inform SEBI about IPEF transfers.

For unitholder claims, REITs can file refund applications with SEBI, subject to review and additional information requests.

A similar process applies to unclaimed/unpaid amounts in InvITs or non-company listed entities, with funds remaining unclaimed for 7 years transferred to the IPEF.

While these regulations correspond with the Companies Act, 2013 (Section 124 & 125), governing the claiming of unclaimed dividends and their transfer to the MCA-regulated IEPF, SEBI’s role differs significantly. The aspects of audit, accounts, transfer, refund, disclosure requirements, administration of the MCA-regulated IEPF, and SEBI’s responsibilities regarding the IPEF are not on equal footing. 

All the three SEBI circulars as available on the SEBI website are enclosed below.

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