Sebi details mechanism to provide exit option to dissenting holders of REITs, InvITs

Sebi details mechanism to provide exit option to dissenting holders of REITs, InvITs

Mumbai: The Securities and Exchange Board of India on Friday chalked out a mechanism to provide exit options to dissenting unit holders of REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts).

A REIT is created with the prime purpose of channelising the funds that could be invested into operational functioning or ownership of real estate that could further generate income for the investors.

Similarly, InvITs too, are like mutual funds, which enable direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return.

In two separate circulars, the markets regulator said the acquirer providing exit option to dissenting unit holders should appoint merchant bankers, registered with the Board as lead managers for the exit option or offer who shall ensure compliance with Sebi regulations and particular circulars prescribing the exit mechanism.

The lead manager should send the letter of offer (LoF) to all dissenting unit holders and also file the same alongwith the due diligence certificate with the exchanges.

Upon completion of the exit option process, a due diligence certificate should be filed by the lead managers with the board within two working days of payment of consideration by the acquirer.

“Sebi’s move of doing away with the perpetual lock-in requirement was welcomed by sponsors of REITs and the previous amendments enabled sponsors of a REIT to monetize their unitholding and fully exit from the portfolio after the initial three-year period from the date of listing,” said Sonam Chandwani, Managing Partner at KS Legal & Associates

“Currently, Sebi has put a step forward in the exit process making a requisite place for dissenting unitholders to appoint one or more merchant bankers as managers to send out LoF to all such dissenting holders to enhance due-diligence in the current framework. The complete provision has been driven to eradicate all sorts of temerity in the exit of the dissenting holders,” Chandwani added.

Source: ET Markets

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