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SEBI proposes greater corporate governance norms for REITs and InvITs

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SEBI in a recent Consultation Paper in relation to REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) sought feedback on its proposal allow minority unitholders to appoint a nominee director of the board of REITs / InvITs. In the Consultation Paper, SEBI proposes for this to be undertaken either by setting a threshold of shareholding (10% in the present case) to enable an investor to appoint a nominee director or through constitution of a Unitholders Council which would inter alia have a nominee appointed from within to the board of the REIT / InvIT.

The Consultation Paper also proposes a Stewardship Code for institutional investors the likes of which are applicable to Mutual Funds and has also sought comments on the concept of self-sponsored REITs / InvITs.

A Financial Express (India) article titled “SEBI’s proposal ensures equal treatment, will boost confidence: Experts” analyses the potential impact of the SEBI proposals on various stakeholders in the industry.

In this background, Mr. Sumit Agrawal, Founder of Regstreet Law Advisors has opined that the idea of having a nominee director on the boards of REITs and InvITs would be attractive to institutional players with minority stakes. It gives them more influence in decision-making and could reduce shareholder and legal conflicts as seen recently in public companies and mutual funds. He further noted that the proposal shows a commitment to empowering investors and enhancing transparency. SEBI should also consider ease of business and minority influence when setting appointment thresholds and that Stewardship Code is a measure that will only serve to enhance governance standards among REITs/InvITs.

Readers are welcome to share their views with Regstreet Law Advisors at info@regsteetlaw.com

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