Extension of Video Conferencing Facility to REITs and InvITs by SEBI

Recently, the Securities and Exchange Board of India, by way of the powers provided under the provisions of section 11 (1) of the SEBI Act 1992, read with Rule 33 of REIT Regulation 2014 and Rule 33 of the InvIT Regulations 2014, has passed a Circular No SEBI/ HO/ DDHS/ DDHS/ CIR/ P/ 2021/ 21, issued on 26.02.2021 regarding the Extension of Video Conferencing Facility to REITs and InvITs.

In this learning blog, we will cover the concept and extension of Video Conferencing Facility to REITs and InvITs.

Concept of SEBI

The acronym SEBI stands for the Securities and Exchange Board of India, which is a statutory governing body entrusted with the responsibility to regulate and administer the Indian Capital Markets.

Further, the main objective of this regulatory body is to monitor and administer the securities market and to safeguard the interests of the investors by enforcing required rules and regulations. That means the main reason behind the formation of SEBI was to curtail malpractices in the securities and capital market and to promote growth and development of the said market.

SEBI was established in the year 1992 under the provisions of the SEBI Act 1992 and is headquartered in Mumbai.

Also, Read: All You need to know about Norms of Buyback of Shares under SEBI?

Concept of Real Estate Investment Trusts

The Real Estate Investment Trusts or REITs mean those companies or entities that own or finance income generating real estate across a variety of property sectors. Further, these companies need to meet a number of requirements and conditions to become an REIT.

Also, it shall be noted that most of the REITs nowadays trade on recognised stock exchanges and provide various benefits to their investors.

To become an REIT or the real estate investment trust in India, the applicant company needs to qualify the criteria as follows:

• 90% of the income must be distributed as dividends to investors;
• 80% of the total investment must be used to generate revenue;
• 10% of the total investment needs to be utilised for construction purposes;
• The company must have Rs 500 crores as the Asset base;
• The company needs to update the NAVs (Net Asset Value) twice in a financial year;

Concept of Infrastructure Investment Trusts

The Infrastructure Investment Trusts or InvITs are the entities that work like a mutual fund and allows the direct investment of a small amount of money from the prospective institutional investors in the infrastructure to earn income as ROI (Return of Investment).

Further, InvITs are often termed as the modified version of the Real Estate Investment Trusts and are made to deal with specific situations of the infrastructure sector.

Also, it shall be noted that the basic four components of Infrastructure Investment Trusts are as follows:

• Trustee;
• Sponsor;
• Investment Manager;
• Project Manager;

Reasons for the Extension of Video Conferencing Facility to REITs and InvITs

SEBI by way of the Circular No SEBI/ HO/ DDHS/ DDHS/ CIR/ P/2 020/ 102, issued on 22.06.2020, together with Circular No SEBI/ HO/ DDHS/ DDHS/ CIR/ P/ 2020/ 201, issued on 08.10.2020, had permitted REITs and InvITs to hold its Annual General Meetings (AGMs) and other meetings of the Unit Holders through Video Conferencing (VC) or by Other Audio Video Means (OAVM) till 31.12.2020.

However, various representations and requests were received by the SEBI to further extend the above mentioned facility of holding meetings of the Unit Holders for some time in 2021.

Also, it shall be noted that the Ministry of Corporate Affairs (MCA), by way of the circular, issued on 31.12.2020 and 13.01.2021, had extended the relaxation of holding EGMs (Extraordinary General Meetings) till 30.06.2021 and AGMs and other meetings till sometime in the year 2021.

Therefore, SEBI has decided the extension of Video Conferencing Facility to REITs and InvITs. That means they can conduct the meetings of unit holders, through VC or OAVM for the situations as follows:

• Annual General Meetings of the unit holders, based on the provisions of Rule 22 (3) of the SEBI (Real Estate Investment Trusts) Regulations 2014 and Rule 22 (3) (a) of the SEBI (Infrastructure Investment Trusts) Regulations 2014, which become due in the calendar year of 2021, to be conducted in this manner till 31.12.2021;
• For any meeting other than the AGM (Annual General Meeting) of the unit holders till 30.06.2021;

Conclusion

In a nutshell, the main reason for which the SEBI has decided the extension of video conferencing facility to REITs and InvITs is to be in consonance with the relaxation offered by the Ministry of Corporate Affairs.

Official Circular Passed by SEBI

Official-Circular-Passed-by-SEBI

Also, Read: SEBI Guidelines for IPO: Guidelines for Making Public Offer in India