SEBI: InvIT Depository Receipts, Unitholder Approval Rules Amended

• SEBI has notified the Securities and Exchange Board of India (Infrastructure Investment Trusts) (Second Amendment) Regulations, 2026.
• The new regulations permit the issuance of depository receipts based on InvIT units.
• The methodology for obtaining specified unitholder approvals has been revised under the updated rules.
• An exit option is now available for unitholders who dissent when a sponsor leaves an InvIT with multiple sponsors.
• These amendments aim to enhance capital raising avenues and strengthen unitholder protections within the Indian InvIT sector.

The permission for depository receipts on InvIT units is expected to unlock new fundraising opportunities, while the revised methodology for unitholder approvals aims to create a more efficient and transparent governance environment.

The Securities and Exchange Board of India (SEBI) has officially announced significant amendments to the existing framework governing Infrastructure Investment Trusts (InvITs) in the country. These changes, formalized under the Securities and Exchange Board of India (Infrastructure Investment Trusts) (Second Amendment) Regulations, 2026, mark a pivotal moment for the sector, introducing new mechanisms for capital raising and strengthening unitholder protections. The comprehensive update addresses several key areas, aiming to enhance the operational flexibility and investor confidence within the Indian infrastructure investment trust landscape.

A primary focus of the new regulations is the expansion of investment avenues, particularly through the introduction of depository receipts. This novel provision allows for the issuance of such instruments backed by InvIT units, potentially broadening the investor base and facilitating easier access to these investment vehicles. Concurrently, SEBI has also refined the processes by which specified unitholder approvals are obtained, streamlining governance and decision-making within InvIT structures.

These regulatory adjustments are poised to reshape how InvITs operate and attract capital. The permission for depository receipts on InvIT units is expected to unlock new fundraising opportunities, while the revised methodology for unitholder approvals aims to create a more efficient and transparent governance environment. Furthermore, the amendments introduce a crucial safeguard for unitholders, providing an exit option under specific circumstances, particularly when a sponsor departs from an InvIT that has multiple sponsors. This suite of changes underscores SEBI's ongoing commitment to evolving India infrastructure investment trust law.

One of the most impactful changes brought about by the SEBI (Infrastructure Investment Trusts) (Second Amendment) Regulations, 2026, is the explicit permission for InvITs to issue depository receipts. This innovative financial instrument allows for the underlying InvIT units to be held by a custodian, with the receipts then traded on international or domestic exchanges, thereby potentially attracting a wider pool of investors, including those who might otherwise face hurdles in directly investing in Indian InvIT units. This move is anticipated to significantly boost the liquidity and global appeal of Indian infrastructure assets, aligning the regulatory framework with international best practices for investment vehicles.

Beyond capital market access, the new SEBI InvIT regulations 2026 also introduce substantial revisions to the methodology employed for securing specified unitholder approvals. This aspect of the regulatory update is critical for the internal governance of InvITs, influencing how major decisions are made and how unitholder interests are represented. While the precise details of the revised methodology are outlined within the amendment, the overarching goal is to ensure that unitholder consent is obtained through processes that are both robust and equitable, reflecting the collective will of the investment community in key strategic matters.

The combined effect of allowing depository receipts for InvIT units and refining the unitholder approval process is expected to foster greater trust and efficiency within the sector. The ability to issue depository receipts on InvIT units provides a new channel for capital formation, which is vital for infrastructure development. Simultaneously, the updated rules for obtaining unitholder approval aim to enhance transparency and accountability, ensuring that significant corporate actions within InvITs are subject to appropriate investor oversight.

A significant protection introduced by the recent amendments concerns the rights of unitholders, particularly in situations involving changes in an InvIT's sponsorship structure. The Securities and Exchange Board of India (Infrastructure Investment Trusts) (Second Amendment) Regulations, 2026, now explicitly provides an InvIT unitholder exit option India for those who dissent during a specific corporate event. This crucial provision is triggered when a sponsor decides to exit an InvIT that operates with multiple sponsors, offering a mechanism for unitholders who may not agree with the change in the sponsor lineup to divest their holdings.

This newly established right aims to mitigate potential conflicts of interest or changes in strategic direction that might arise from a sponsor's departure. By offering an exit option for dissenting unitholders, SEBI seeks to protect minority unitholder interests and maintain investor confidence in the stability and governance of InvITs. The introduction of this specific provision for an InvIT sponsor exit dissenting unitholders scenario underscores a commitment to balancing the operational flexibility of InvITs with robust investor protection measures.

The overall impact of these changes, including the permission for SEBI InvIT depository receipts unitholder approval and the new exit mechanism, is to create a more dynamic yet secure environment for infrastructure investments. The regulatory body's proactive approach in updating the India infrastructure investment trust law reflects an understanding of the evolving needs of both InvITs and their investors, ensuring that the framework remains relevant and supportive of growth while upholding high standards of governance and investor rights.

Lawyers advising on Indian InvITs must familiarize themselves with the new regulations permitting depository receipts and the revised unitholder approval thresholds, especially regarding the exit option for dissenting unitholders, to ensure compliance and update client strategies for fundraising and governance.

Source: Original regulatory update via SCC Times