Capital markets regulator Sebi is looking to come out with a framework for the issuance of subordinate units by REITs and InvITs to sponsors and their associates.
Additionally, the regulator has proposed a framework for unit-based employee benefits (UBEB) in the context of REITs (real estate investment trusts) and InvITs (infrastructure investment trusts).
The Securities and Exchange Board of India (Sebi) has sought comments from the public till December 29 on the proposals.
Under the proposed framework, subordinate units can be issued only to the sponsor, its associates and the sponsor group, such units should carry only inferior voting as compared to ordinary units and the units can be issued to the eligible entities in the initial offer or any offering after the initial offer, Sebi said in its consultation paper.
It further suggested that subordinate units can only be transferred inter-se amongst the sponsor entities.
“Any issuance of subordinate units after the initial offer shall require prior approval from 75 per cent of the unitholders by value. Sponsor(s), sponsor group, associates of sponsor(s) and any other parties related to the transaction shall not vote on such matters,” Sebi suggested.
The regulator suggested that subordinate units and ordinary units must be issued under separate ISINs and such units should not be considered for mandatory minimum unitholding requirements applicable to sponsors.
It further recommended that the entitlement date including performance benchmark for conversion of subordinate units to ordinary units should be clearly defined and specified in the offer document.
Further, a one-time extension in the entitlement date should be permitted for a maximum period of one year subject to certain conditions.
“The minimum time gap between issuance of subordinate units and entitlement date/event for conversion of subordinate units to ordinary units shall be one year,” Sebi suggested.