The Securities and Exchange Board of India ("SEBI") has recently amended the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 ("InvIT Regulations") pursuant to the Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2025 ("InvIT Amendment Regulations"), which came into force on April 2, 2025, whereby the following key amendments have been brought into effect:
Additional onus on the trustee
Regulation 9 of the InvIT Regulations, which details the rights and responsibilities of the trustee of an infrastructure investment trust ("InvIT"), has been amended to include sub-regulation (23) which imposes further responsibilities on the trustee, such as, conducting due diligences of investments, assets, etc., maintaining high standards of governance and protecting and prioritizing interest of unit holders. An illustrative list of such responsibilities has been inserted in Schedule X of the InvIT Regulations. It maybe pertinent to note that Regulation 9(23) shall come into effect 180 (one hundred and eighty) days from the date of the InvIT Amendment Regulations.
Inter-se transfer of locked-in units
Through an amendment to Regulation 12(5) of the InvIT Regulations, sponsors and/ or their group entities have now been allowed to undertake inter-se transfers of locked-in units, subject to such units remaining locked-in for the balance term as required under Regulation 12 of the InvIT Regulations. Transfers of locked-in units have also been permitted between outgoing sponsors and incoming sponsors, subject to meeting the requirements of Regulation 12 of the InvIT Regulations.
Investments in unlisted equity shares
For InvITs which have raised funds by way of a public issue, Regulation 18(5)(b) of the InvIT Regulations earlier provided that such InvITs could make investments in inter alia listed equity shares of companies which derived at least 80% (eighty percent) of their operating income from the infrastructure sector. Pursuant to the InvIT Amendment Regulations, Regulation 18(5)(b) has been amended such that, InvITs which have raised funds by way of a public issue, can now also make investments in unlisted equity shares of the exclusive project manager/ service provider for the infrastructure project, subject to the entire shareholding in such company being held by the InvIT, directly or indirectly.
Vacancies on the board of an investment manager
SEBI in Regulation 4(2)(e) of the InvIT Regulations has specified the eligibility criteria that is required to be met by an investment manager of an InvIT seeking registration with SEBI. One such eligibility criteria that has been provided in Regulation 4(2)(e)(v) of the InvIT Regulations states that the investment manager's board should comprise of at least 50% (fifty percent) independent directors (in case of companies) or independent board members (in case of LLPs). An amendment has now been brought in by way of a proviso to Regulation 4(2)(e)(v), which sets out the time period within which a vacancy in the office of such independent directors is required to be filled in by the investment manager. A similar amendment has also been made in Regulation 26H(1) of the InvIT Regulations, which prescribes that the board of the investment manager should comprise of a minimum of 6 (six) directors, including at least 1 (one) woman independent director.
Argus View
The InvIT Amendment Regulations have significantly expanded the role and responsibilities of trustees. While these amendments are necessary to address the prevailing gaps in governance of InvITs, they have also increased trustee liability.
On a separate note, the leeway provided with respect to transfers of locked-in units and permitted investments in unlisted equity shares of project managers, are welcome changes for ease of doing business.
A copy of the InvIT Regulations and the InvIT Amendment Regulations can be accessed here and here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
