CIRCULAR
SEBI/HO/DDHS-PoD-2/P/CIR/2023/154 September 11, 2023
To,
All Real Estate Investment Trusts (“REITs”)
All Parties to REITs
All Depositories
All Recognized Stock Exchanges
Madam / Sir,
Sub: Board nomination rights to unitholders of Real Estate Investment
Trusts (REITs)
1. Regulation 4(2)(g) of SEBI (Real Estate Investment Trusts) Regulations, 2014
(“REIT Regulations”) inter-alia provides that unitholder(s) holding not less than
ten percent of the total outstanding units of the REIT, either individually or
collectively, shall be entitled to nominate one director on the board of directors
of the Manager, in the manner as may be specified by the Board.
2. Accordingly, the framework to exercise board nomination rights by the Eligible
Unitholder(s) has been specified at Annexure - A.
3. Reporting and Monitoring
The Manager of the REIT shall, within ten days from the end of each calendar
month, review whether the Eligible Unitholder(s) who have exercised the board
nomination right, continue to have/hold the required number of units of REIT and
make a report of the same. The Manager of the REIT shall submit such report
to the Trustee of the REIT.
4. This circular shall come into force with immediate effect.
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5. This circular is issued in exercise of the powers conferred under Section 11(1)
of the Securities and Exchange Board of India Act, 1992 and Regulation 4(2)(g)
of the SEBI (Real Estate Investment Trusts) Regulations, 2014. This circular is
issued with the approval of the competent authority.
6. The recognized Stock Exchanges are advised to disseminate the contents of
this Circular on their website.
7. This circular is available on the website of Securities and Exchange Board of
India at www.sebi.gov.in under the category “Legal  Circulars”.
Yours faithfully
Ritesh Nandwani
Deputy General Manager
Department of Debt and Hybrid Securities
Tel No. +91-22-2644 9696
Email id – riteshn@sebi.gov.in
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Annexure – A
Board Nomination Rights to Unitholders of Real Estate Investment
Trusts (REITs)
1. Definitions
1.1. “Eligible Unitholder(s)” shall mean unitholder(s) holding ten percent or more
of the total outstanding units of the REIT, either individually or collectively.
1.2. “Unitholder Nominee Director” shall mean a non-independent director
nominated by Eligible Unitholder(s) on the Board of Directors of the
Manager.
2. Conditions for Nomination of a Unitholder Nominee Director
2.1. (a) Eligible Unitholder(s) shall have the right, but not the obligation, to
nominate any person for appointment as Unitholder Nominee Director.
(b) Eligible Unitholder(s) shall be entitled to nominate only one Unitholder
Nominee Director, subject to the unitholding of such Eligible Unitholder(s)
exceeding the specified threshold. If the right to nominate one or more
directors on the Board of Directors of the Manager is available to any entity
(or to an associate of such entity) in the capacity of shareholder of the
Manager or lender to the Manager or the REIT (or its HoldCo(s) or SPVs),
then such entity in its capacity as unitholder, shall not be entitled to nominate
or participate in the nomination of a Unitholder Nominee Director.
2.2. If the unitholding of more than one unitholder is aggregated for the purpose
of qualifying as Eligible Unitholder(s) to exercise the right to nominate a
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Unitholder Nominee Director, then such unitholders shall not be eligible to
participate in any other group of Eligible Unitholder(s).
2.3. The Board of Directors of the Manager shall formulate and adopt a policy in
relation to the qualifications and criteria for appointment and evaluation
parameters of individuals nominated for Unitholder Nominee Director. The
policy shall also specify remuneration / sitting fees, process of removal or
resignation of Unitholder Nominee Directors and the role of the Nomination
and Remuneration Committee and/or the Board of Directors in such matters.
Such policy shall be made available on the website of the REIT.
2.4. Unitholder Nominee Directors shall recuse themselves from voting on any
transaction where either such director, such director’s associates or the
Eligible Unitholder(s) who nominated him / her or associate of such Eligible
Unitholder(s) is a party.
3. First time Nomination after the issuance of this circular
3.1. Intimation by the Manager to all unitholders
3.1.1. The Manager shall send a written intimation to all unitholders on their
email address(es) registered either with the Manager or with any
depository, within ten days from the end of September 30, 2023,
requesting them to inform the Manager if any Eligible Unitholder(s) wish
to exercise the right to nominate a Unitholder Nominee Director.
3.2. Notice by Eligible Unitholder(s) who wish to exercise the board nomination
right
3.2.1. Eligible Unitholder(s) who wish to exercise this right shall inform the
Manager through a written notice within ten days of receipt of the
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intimation from the Manager. The Eligible Unitholder(s) shall be
reckoned based on the unitholding pattern as on September 30, 2023.
3.2.2. The Eligible Unitholder(s) shall inform the Manager of the REIT in writing
of their proposed candidate for the Unitholder Nominee Director along
with following details:
i. name of the candidate
ii. DIN of the candidate
iii. a brief profile of the candidate, including age, educational
qualifications, professional qualifications, nationality, occupation,
address, experience in the sector and sub-sector in which the REIT
operates and directorship in other entities, together with back-up
documents
iv. details of any outstanding criminal action, regulatory action or
material civil litigation against the candidate
v. details required under The Companies Act, 2013 to facilitate the
Manager for filing of Form DIR-12
vi. confirmations in relation to eligibility of the candidate as set out in
Annexure – B.
3.2.3. If multiple unitholders are aggregating their unitholding for the purpose
of nomination right then such notice shall also identify up to two
unitholders as authorized representative of the group of Eligible
Unitholder(s). Any communication by such authorized representatives to
the Manager for the purpose of such nomination shall be deemed to be
on behalf of, and representative of the interests of, the entire group of
Eligible Unitholder(s).
3.2.4. The notice shall also set out the names, demat account details and
unitholding of the Eligible Unitholder(s). The notice shall also contain a
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specific acknowledgement from the Eligible Unitholder(s) that their
unitholding shall be maintained at atleast ten percent of the total
outstanding units of the REIT, failing which they shall lose the right to
have their Unitholder Nominee Director on the Board of Directors of the
Manager.
3.2.5. The eligibility of a Unitholder Nominee Director shall be confirmed by the
Manager, based on the evaluation done by the Nomination and
Remuneration Committee and/or the Board of Directors of the Manager
in line with the policy formulated in this regard, within ten days of receipt
of notice from Eligible Unitholder(s).
3.2.6. Once the eligibility of a Unitholder Nominee Director is confirmed, the
Manager shall take necessary steps to complete the appointment of
such director on the Board of Directors within thirty days from the date
of such confirmation. The Manager shall ensure that the appointment of
the Unitholder Nominee Director is in compliance with the requirements
with respect to the composition of the Board of Directors under the REIT
Regulations and other applicable laws.
3.2.7. If the candidate proposed is not eligible or not found suitable based on
the evaluation done by the Nomination and Remuneration Committee
and/or the Board of Directors of the Manager in line with the policy
formulated in this regard, the reasons shall be recorded in writing and
shall be communicated by the Manager to the Eligible Unitholder(s)
within ten days of receipt of notice from Eligible Unitholder(s). In such
case, the Eligible Unitholder(s) may submit another candidate within a
period of ten days from the receipt of such communication from the
Manager.
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4. Subsequent Nomination by unitholders on an annual basis
4.1. The Manager shall send a written intimation to all unitholders on their email
address(es) registered either with the Manager or with any depository, within
ten days from the end of each financial year, requesting them to inform the
Manager if any Eligible Unitholder(s) wish to exercise the right to nominate
a Unitholder Nominee Director.
4.2. Eligible Unitholder(s) who wish to exercise this right shall inform the Manager
through a written notice within ten days of receipt of the intimation from the
Manager. The Eligible Unitholder(s) shall be reckoned based on the
unitholding pattern of the REIT as on March 31st of the financial year.
4.3. The provisions contained in paragraph 3.2 above shall apply in regard to the
notice by Eligible Unitholder(s) to the Manager and for appointment of the
Unitholder Nominee Director.
5. A Unitholder Nominee Director shall continue to remain on the Board of
Directors of the Manager unless:
i. the nomination is withdrawn by Eligible Unitholder(s) or
ii. change in the Unitholder Nominee Director is requested by Eligible
Unitholder(s) or
iii. the unitholding of Eligible Unitholder(s) falls below the required threshold
consequent to which the Unitholder Nominee Director resign / step down
from the Board of Directors of the Manager or
iv. the Unitholder Nominee Director is unable to serve or resign or is
removed from the Board of Directors of the Manager for any reason
including the reasons set out in this circular.
6. If any unitholder(s) acquires/holds units of the prescribed threshold of ten
percent unitholding or more during a particular financial year, then such
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unitholder(s) shall be entitled to exercise the nomination right only in the
following financial year as per the process mentioned in paragraph 4.
7. Review of Unitholding of Eligible Unitholder(s) by the Manager
7.1. The Manager of the REIT shall, within ten days from the end of each
calendar month, review whether the Eligible Unitholder(s) who have
exercised the board nomination right, continue to have/hold the required
number of units of REIT and make a report of the same. The Manager of the
REIT shall submit such report to the Trustee of the REIT.
7.2. On review by the Manager, if it is found that Eligible Unitholder(s) do not
have/hold the required number of units, then the Manager shall inform the
same to the Trustee, such unitholder(s) and the Unitholder Nominee
Director. The Manager and such Unitholder(s) shall require the relevant
Unitholder Nominee Director nominated by such Unitholder(s) to resign /
step down from the Board of Directors of the Manager forthwith and such
Unitholder Nominee Director shall accordingly resign / step down from the
board.
8. Change in Unitholder Nominee Director or withdrawal of nomination
8.1. If an Eligible Unitholder or a group of Eligible Unitholders propose to
withdraw their nomination for the Unitholder Nominee Director that has been
appointed on the Board of Directors of the Manager, then such Eligible
Unitholder(s), or their authorized representatives, shall inform the Manager
and the Unitholder Nominee Director of the same, and the Unitholder
Nominee Director shall resign / step down from the Board of Directors of the
Manager forthwith.
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8.2. If an Eligible Unitholder or a group of Eligible Unitholders propose to change
a Unitholder Nominee Director who has been appointed on the Board of
Directors of the Manager, then such Eligible Unitholder(s), or their authorized
representatives, shall inform the Manager of the proposed candidate in the
manner set out in paragraph 3.2.2 to 3.2.4 of this circular. The Manager shall
evaluate the proposed candidate and the provisions of paragraph 3.2.5 to
3.2.7 of this circular shall apply.
9. Vacating of office of a Unitholder Nominee Director
9.1. If at any time, the individual or collective unitholding of the Eligible
Unitholder(s), who have nominated a Unitholder Nominee Director, falls
below ten percent of the total outstanding units of the REIT, then the Eligible
Unitholder(s) shall, notwithstanding the requirement contained in paragraph
7 above, immediately inform the Manager within two working days from such
change and the Unitholder Nominee Director shall resign / step down from
the Board of Directors of the Manager within two working days from such
change.
9.2. If the individual or collective unitholding of the Eligible Unitholder(s), who
have nominated a Unitholder Nominee Director, falls below ten percent of
the total outstanding units of the REIT on account of any fresh issuance of
units by REIT, then the Eligible Unitholder(s) shall, notwithstanding the
requirement contained in paragraph 7 above, immediately inform the
Manager within two working days from the date of allotment of fresh units of
the REIT and the Unitholder Nominee Director shall resign / step down from
the Board of Directors of the Manager within two working days from such
date of allotment.
9.3. In case of death or permanent disability of a Unitholder Nominee Director,
the Eligible Unitholder(s) that nominated such Unitholder Nominee Director
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may propose another individual as a replacement in the manner described
in paragraph 3.2.2 to 3.2.7 of this circular.
9.4. The Board of Directors (including the Nomination and Remuneration
Committee) shall have the power to remove a Unitholder Nominee Director
from office, for reasons to be recorded in writing, including if the Unitholder
Nominee Director ceases to meet the eligibility criteria or other requirements,
including as set out in the policy adopted by the Manager under paragraph
2.3 of this circular.
10. Amendment of Trust Deed and Investment Management Agreement
10.1. In view of the Securities and Exchange Board of India (Real Estate
Investment Trusts) (Second Amendment) Regulations, 2023 notified on
August 17, 2023, the trust deed and investment management agreement
shall stand amended or be deemed to incorporate provisions to provide
board nomination rights to Eligible Unitholder(s) in the manner specified in
this circular.
10.2. Further, the trustee and the Manager shall, within a period of six months from
the date of this circular, ensure that the trust deed and the investment
management agreement of the REIT are amended to provide for nomination
and appointment of Unitholder Nominee Directors on the Board of Directors
of the Manager by Eligible Unitholder(s).
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Annexure - B
Eligibility criteria for Unitholder Nominee Directors
The following eligibility requirements should be fulfilled by the candidates proposed
to be considered for appointment as Unitholder Nominee Directors. The Manager
may supplement these requirements as it deems fit, through the policy adopted
under paragraph 2.3 of this circular.
1. The person should be “fit and proper” based on the criteria specified under
Schedule II of the Securities and Exchange Board of India (Intermediaries)
Regulations, 2008, as amended.
2. The person is not a willful defaulter or fraudulent borrower, or a promoter or
director or person in control of a company or entity categorized as such by any
bank or financial institution in accordance with the guidelines prescribed by the
Reserve Bank of India.
3. The person’s name does not appear under any list of disqualified directors issued
by the Ministry of Corporate Affairs and is not debarred from acting as a director
or member of management by any court, regulatory or supervisory authority.
4. The person is not debarred from accessing the capital markets by the Board or
any other authority.
5. The person is not or has not been a promoter or director or person in control of
any company or entity which has been debarred from accessing the capital
markets by the Board or any other authority.
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