“SEBI’s New Guidelines: Annual Secretarial Disclosure Formats for REITs and InvITs to Ensure Transparency and Compliance”
SEBI Introduces Disclosure Formats for REITs and InvITs’ Compliance Reports on Governance and Annual Secretarial
The Securities and Exchange Board of India (SEBI), the capital markets regulator, has recently released standardized disclosure formats for compliance reports on governance and annual secretarial activities concerning Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These new formats will become effective from the financial year 2023-24, as announced by SEBI through four separate circulars.
The disclosure formats for compliance reports on governance require InvITs and REITs to provide comprehensive information. This includes disclosing the names of investment managers, details about the composition of the investment managers’ board of directors and committees, as well as records of board and committee meetings on a quarterly basis.
Additionally, SEBI has introduced specific formats for investment managers of REITs and InvITs to submit their financial reports for the respective financial year. These reports will play a crucial role in ensuring transparency and compliance within the sector.
As per SEBI’s guidelines, investment managers are required to submit quarterly compliance reports on governance to the stock exchanges within 21 days after the end of each quarter. The reports must be signed by either the compliance officer or the chief executive officer of the investment manager.
SEBI has also mandated the appointment of a practicing company secretary by the investment manager of each InvIT and REIT on an annual basis. The appointed company secretary will assess compliance with all applicable rules and submit a report to the investment manager.
The annual secretarial compliance report format includes disclosures on regulatory compliance, deviations, and observations made by the practicing company secretary. It also requires the investment manager to disclose any actions taken by SEBI or stock exchanges against the InvIT or REIT, their promoters, or directors, as well as actions taken to address previous report observations.
The investment manager must provide all necessary documents requested by the practicing company secretary for the preparation of the secretarial compliance report.
The annual secretarial compliance report, prepared in the new format, must be submitted to the stock exchanges within 60 days after the end of each financial year.
Both the compliance report on governance and the annual secretarial compliance report will be included in the annual report of the respective InvITs and REITs.
REITs and InvITs were introduced in India to provide investors with opportunities to invest in real estate and infrastructure projects while diversifying risks through pooling arrangements. REITs mainly invest in completed and revenue-generating real estate assets, while privately placed InvITs can invest in under-construction assets as well as completed and revenue-generating assets.