Sebi to put in place governance norms for REITs, InvITs similar to listed companies

SEBI

Markets watchdog Sebi on Tuesday said it will put in place governance norms for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) on the lines of listed companies.

With respect to REITs and InvITs, the provisions such as those related to tenure of auditor, computation of leverage and unclaimed/unpaid distribution will be streamlined by the regulator.

These proposals were approved by the board of Sebi during its meeting here on Tuesday.

Sebi has decided to introduce governance norms for REITs and InvITs on the lines of corporate governance norms for listed companies "The corporate governance norms applicable for listed companies to be applicable to REITs and InvITs, irrespective of whether any debt security was issued by them," it said in a release.

However, certain provisions of Sebi (Listing Obligations and Disclosure Requirements) Regulations that are not directly applicable or is already specified for REIT/ InvIT under respective regulations have been carved out.

Kranti Mohan, Partner and Head of REITs and InvITs at legal firm Cyril Amarchand Mangaldas, said that while these entities have already implemented these governance requirements, "putting in these regulations would avoid ambiguity and ensure compliance on an ongoing basis".

As part of streamlining the provisions for REITs and InvITs, the regulator said the tenure of an auditor will be made till the conclusion of the fifth annual general meeting of unit holders, and a statutory auditor will undertake limited review of audit of all the entities or companies whose accounts are to be consolidated.

"Investment in overnight fund to be considered as cash and cash equivalent, for the purpose of computation of leverage... unclaimed / unpaid distributions for REIT/ InvIT to be transferred to the 'Investor Protection and Education Fund' constituted by Sebi," the release said.

In another decision, Sebi will allow Alternative Investment Funds (AIFs) to participate in Credit Default Swaps, not only as protection buyers but also as protection sellers. This will be subject to conditions for risk mitigation.

The regulator said the move is aimed to provide greater investment flexibility to Managers of AIFs and to facilitate deepening of the domestic corporate bond market.