Framework for Unit Based Employee Benefit Schemes for Employees of Investment Manager of InvITs and Manager of REITs

InvIT of Infrastructure Investment Trust is a trust registered with SEBI to carry out the activity prescribed under SEBI (Infrastructure Investment Trusts) Regulations, 2014. An InvIT raises funds by issuing units to investors and invests those funds primarily in assets in infrastructure sector whereas Real Estate Investment Trust (REIT) registered under REIT Regulations facilitate pooled investment in real estate assets or properties and is required to be set up as a trust registered with and regulated by SEBI.

The SEBI has issued a consultation paper on framework for issuance of Units Based Employee Benefits on December, 09^th 2023. The said consultation paper, inter-alia, invited public comments on the framework.

Background and Proposal:

SEBI recently approved the proposal via amendments in SEBI (Infrastructure Investment Trusts) Regulations, 2014 and SEBI (Real Estate Investment Trusts) Regulations, 2014 in order to enable a framework for Unit Based Employee Benefit schemes (UBEB) for the employees of Investment Manager of InvIT and Manager of REIT, in its meeting held on April 30, 2024.

Objectives of UBEB Scheme:

To align the interests of the InvIT / REIT with the interests of the employees of the Investment Manager of InvIT and Manager of the / REIT.

Benefits of UBEB Scheme:

The enabling framework for the Unit Based Employee Benefit Schemes offers the following benefits

1. Attract and Retain Employees.
2. Foster a culture of ownership.
3. Alignment of Interest of InvIT/REIT with Employees of Manager of InvIT and REIT.
4. Creation of Wealth and Unitholders value.
5. Providing employees with valuable opportunities for financial growth and security.

Eligibility under the Framework:

• Employees of the Manager of REIT and Investment Manager of InvIT are eligible under the Framework for Unit Based Employees Benefits.

Implementation of UBEB schemes:

• Creation of the Employee Benefit Trust (EB Trust) is mandatory.
• Units of REIT/InvITs shall be offered to EB Trust through different modes offered under the Framework.
• Units so received shall be used for providing under Unit Based Employees Benefits.

Sources of units for EB Trust:

The following two ways EB trust will receive units: –

1. From any existing Shareholders/Unitholders Manager of REIT / Investment Manager of InvIT.
2. Manager of REIT / Investment Manager of InvIT through EB Trust may subscribe to the units of REIT/InvIT in lieu of management fees, only for the limited purpose of providing UBEB.

Applicable Laws to implement the Framework will cover: –

1. SEBI (Infrastructure Investment Trusts) Regulations, 2014/ SEBI (Real Estate Investment Trusts) Regulations, 2014, as the case may be.
2. SEBI (Prohibition of Insider Trading) Regulations, 2015.
3. SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003 and any other applicable Law.

It is anticipated that SEBI will update the current applicable laws to provide clearer provisions regarding the governance of UBEB Schemes by InvITs and REITs. This update is expected to bring more clarity to the framework.