Skyroot’s Vikram-1 just made India the third country where a private company – not a government agency has put payloads into orbit. Agnikul is now working on booster recovery. And in July 2026, IN-SPACe published India’s first-ever rulebook for planned re-entry: the deliberate, controlled return of a spacecraft, capsule, or cargo pod to Earth.

This isn’t theoretical anymore. The first re-entry authorisation applications are about to land on IN-SPACe’s desk and for foreign operators, one of the crucial question they’ll face isn’t aerodynamics. It is corporate structure.

For a foreign operator, the obvious question is whether the spacecraft can safely return to India. The question that actually determines how the mission gets built is: through which Indian entity should it be undertaken?

The Indian Regulatory Gateway

A foreign company can’t apply for re-entry authorisation in its own name. The application has to be routed through an Indian entity and that single requirement pulls the whole mission into India’s regulatory orbit. The Indian applicant becomes responsible for coordinating the authorisation process, supplying technical information, meeting safety and security conditions, arranging local warnings and recovery support, and sorting out insurance and liability.

But here’s another important aspect: an “Indian entity” doesn’t have to mean a newly incorporated subsidiary. There are three real paths in picking the right option.

Which Operator Are You?

The one-off mission → a collaboration arrangement If this is a single experimental flight, engage an existing Indian space-sector company under a collaboration or service arrangement. The spacecraft stays owned and technically controlled by the foreign company; the Indian partner handles the regulatory interface and local operational support. No shares change hands, so this typically sits outside FDI  instead, FEMA governs the cross-border payments: mission-support fees, reimbursements, technology charges, insurance premiums, guarantees, indemnity payments.

The repeat player → a joint venture Planning recurring missions? A JV makes more sense once you need real Indian capability – tracking, telemetry, mission control, recovery operations, receiving infrastructure. How much foreign ownership you can hold under the automatic route depends entirely on what the JV actually does day to day.

The long-term bet → a wholly-owned subsidiary Maximum control, maximum commitment. But 100% ownership isn’t automatic everywhere  where the subsidiary’s activity falls into a category capped at 74% or 49%, you’ll need prior government approval before you’re actually in business.

The FDI Problem Nobody’s Solved Yet

Here’s where it gets interesting. India’s current FDI policy sets clear thresholds for the space sector:

• Up to 74% (automatic route) — satellite manufacturing and operation, satellite-data products, ground and user segments
• Up to 49% (automatic route) — launch vehicles and associated systems, spaceports
• Up to 100% (automatic route) — specified component, system, and subsystem manufacturing

The FDI policy assigns clear caps of 49%, 74% or 100% to recognised space activities such as launch vehicles, satellite operations, ground segments and component manufacturing. But re-entry missions, cargo-return vehicles and re-entry modules still sit outside these neat boxes. Until the FDI policy catches up, classification will run on substance, not labels. In that gap, alignment with the Department of Space is not optional it is the key to designing the investment and operating structure.

The Practical Route

For an isolated foreign mission, partnering with an experienced Indian operator will almost always beat standing up a new investment structure from scratch. For a continuing commercial programme, a joint venture within the applicable automatic-route limit strikes the best balance between foreign technology and Indian operating capability. A wholly-owned subsidiary earns its complexity only when control is genuinely essential and only after the sectoral category and approval route have been mapped out in advance.

The Real Opportunity

The new re-entry framework isn’t just a safety regulation it’s the opening bid for an entirely new Indian market: mission control, tracking, recovery, insurance, engineering, regulatory support. Every foreign mission that comes through will need an Indian partner for some piece of that chain.

A spacecraft’s journey ends when it safely returns to Earth. For a foreign operator, the legal journey only ends when the Indian structure, FEMA route, contractual responsibility, and liability framework are locked in before the mission ever leaves the ground.

The post Before Your Spacecraft Lands in India, Your Company Structure Better Already Have first appeared on MMJC.

Background:

Infrastructure Investment Trusts (InvITs) are investment vehicles designed to collect funds from public and institutional investors and invest them into long-term infrastructure projects. Considering the quantum of funds and assets handled by InvITs, they are structured in a manner where multiple entities, such as trustees, Investment Managers (IMs), and Project Managers (PMs) are involved in decision-making as well as day-to-day activities.

A similar working model is seen in case of Real estate Investment Trusts (ReITs) as well.

Introduction:

Considering the scale of investor funds and number of entities involved in functioning of INVIT, it is essential to have some eligibility standard for entities or individuals involved in management of INVIT in order to ensure safe keeping of funds and assets, and for smooth conduct of business. SEBI has introduced such basic eligibility standard for InvITs and parties to InvIT in the form of “fit and proper person criteria (criteria)” as prescribed under SEBI intermediaries’ regulations 2008.

In this article we shall make an effort to understand these criteria and its implications in the context of InvITs and/or ReiTs.

About Fit and proper person criteria:

The “fit & proper person criteria” is one of the  basic regulatory gateways that SEBI has created to ensure the basic competency of market intermediaries and persons in control of such intermediaries. The criteria originally formed part of ‘SEBI criteria for fit and proper persons regulations 2004’. However, these regulations were latter repealed and the criteria now forms part of Schedule II of Intermediaries regulations 2008.

the following criteria, as applicable to, both entities and individuals, can broadly be classified into 2 types.

• Principle-based:

Principle-based criteria relate to personal attributes such as integrity, honesty, reputation, and character. These factors are subjective in nature and do not have fixed parameters for determination. they primarily apply to individuals rather than entities.

• Rule-based:

Rule-based criteria are triggered by the occurrence of specific events, such as convictions, regulatory actions, or issues relating to financial integrity. Upon the occurrence of such events, the concerned person is deemed not to be “fit and proper. Unlike principle-based criteria, these apply to both, entities and individuals.

Applicability of criteria to INVITs:

 The fit and proper criteria become applicable to InvITs under Regulation 4(2)(k)[1] of the InvIT Regulations. This provision requires that both the InvIT and all its parties comply with the criteria at all times.

As per definition under reg 2(1) (ZK[2]) of InvIT regulations, Parties to the InvIT include:

• Sponsor(s)/sponsor group
• Investment Manager (IM)
• Project Manager (PM)
• Trustee

Since regulation 4(2)(k) says that InvIT and its parties should be fit and proper persons as per the criteria prescribed under schedule II of Intermediaries regulations, reference also must be made to clause II of schedule II which prescribes the entities who are required to comply with the criteria. As per clause II[3] of Schedule II, in addition to InvITs and its parties, the criteria also apply to:

• Directors and key managerial personnel of parties to InvIT,
• Principal officers of InvIT and parties to InvIT and
• the persons holding controlling interest or persons exercising control, directly or indirectly over InvIT or parties to InvIT.

An exact same provision as reg 4(2)(k) of InvIT regulations, is found in regulation 4(2)(j) of ReIT regulations as well. Hence by virtue of ReIT regulations, the criteria is applicable to ReIT its parties and individules like directors, KMPs, principal officers and persons in control of ReIT and its parties, just like InvITs.

It is to be specifically noted here that, as per schedule II of intermediary’s regulations the criteria apply to all directors, whether executive or non-executive. Therefore, the criteria have to be complied with by all directors including non-executive directors and independent directors. Basically, the criteria apply to persons who occupy responsible positions in InvIT/ReIT or their parties or those who are in a position to significantly influence the decision making process of the InvIT/ReIT.

Compliance requirement under the criteria:

The criteria do not prescribe any specific compliance action like form filing or submission of declaration etc., to be undertaken as compliance. Instead, they prescribe the following requirements,

• Integrity, reputation, soundness of mind and good character to be possessed by individuals and
• Absence of convictions and restrain orders etc. in case of all entities including individuals.
• Person being solvent and non-initiation of recovery proceedings, or passing of winding up order etc.

Although there is no specific compliance action required, the conditions listed in the criteria have to be satisfied on continuous basis .

Compliance stages:

As per regulation 4 of the InvIT Regulations and ReIT regulations, compliance with the criteria by the InvIT/ReITs and all its associated parties on continuous basis is a pre-condition for registration as well as continuation as an InvIT. Accordingly, compliance can broadly be divided into two stages:

• compliance at the time of registration, and
• compliance on a continuous basis post-registration.

• Compliance at the time of registration: Since compliance with the criteria is a pre-condition for registration of InVIT, all parties to the proposed InvIT — including the sponsor, trustee, Investment Manager (IM), project manager (PM), their principal officers, directors, KMPs and persons in control are required to satisfy the criteria at the time of registration. That means, if any party or individual falls under any disqualification listed in the criteria prior to applying for registration, then he/it will be considered as not satisfying the criteria at the time of registration.
• Compliance on a continuous basis post registration: Once the InvIT is registered, both the InvIT and all its associated parties are required to comply with the criteria on a continuous basis. If at any point in time, an entity or individual falls within any of the disqualifications, such person or entity will be considered as not satisfying the criteria from the very movement he/it incures the disqualification.

Consequences of non-compliance:

As mentioned earlier, the criteria have to be complied with by all parties at all times. The non-compliance by a single entity/person can result in to serious consequences for whole structure of InVIT. The clauses 4 to 7 of schedule II of Intermediaries regulations (the criteria) prescribe for such consequences.

As per these clauses, if an InvIT fails to satisfy the prescribed criteria, it is not entitled to obtain or retain registration. Further, if at any time it is found that any director/KMP/principal officer of the InvIT or its parties does not meet the criteria, such individual must be replaced within 30 days from the date of non-compliance. Similarly, if any person in control fails to satisfy the criteria, they are required to divest their holdings in the InvIT or its parties within 6 months from the date of disqualification. If InVIT does not replace the disqualified person within 30 days of disqualification, or the person in control does not divest his stake, then the InVIT itself will be held not a fit and proper person, which may result in to cancelation of registration.

Example of such situation can be seen in the case of Sahara Mutual Funds[4], wherein SEBI had cancelled registration of Sahara Mutual fund and its Asset Management Company (AMC), for the reason that, the person in control of sponsor and AMC of the said mutual fund failed to satisfy the criteria and no action was taken against him. An analogous situation was also seen in case of 1 Real estate Investment Trust (REIT) wherein the CEO of the IM of Reit failed to satisfy the criteria and hence SEBI sent show cause notice to the Reit. However, on receipt of SCN from SEBI, the IM of ReIT replaced the CEO and hence no further action was taken.

Responsibility to ensure compliance:

Given the serious consequences of non-compliance, it is essential that the InvIT, its parties, and all individuals involved in their management comply with the criteria at all times. However, neither the InvIT Regulations nor Schedule II of the Intermediaries Regulations assign this responsibility to any specific person. In the absence of a clear provision, the question of who is responsible for ensuring such compliance becomes significant, especially considering the number of entities and individuals involved and the implications of non-compliance.

Even though there is no express provision, reference may be made to Regulation 10(25)[5] of the InvIT Regulations, which requires the Investment Manager to appoint a compliance officer responsible for ensuring compliance with the InvIT Regulations and reporting any non-compliance to its board. Since compliance with the criteria forms part of regulatory compliance, it may be said that it is the primary responsibility of the IM to oversee the compliance with the criteria by InvIT and all its parties. The latest amendment to schedule II of Intermediaries regulations strengthens this view. The amendment has inserted a new clause 3A[6] requiring the intermediary (InvIT in our case), to inform SEBI within 15 working days about non-compliance with the criteria by any person covered in clause II of schedule II, that is by any person who is required to satisfy the criteria. Since InvIT functions through IM, it becomes duty of IM to oversee the compliance and report its non-compliance if any to SEBI

This view is also supported by the fact that, whenever SEBI observes or suspects non-compliance with the criteria, it requires the IM to check and verify the compliance.

However, looking at the number of separate entities required to comply with the criteria and the serious consequence of non-compliance, it would not be appropriate to hold any one individual or entity alone, responsible to ensure compliance. Hence InvIT regulation assigns certain responsibility to trustee as well.

if we refer to regulation 9(20[7]) of InvIT regulations, it is also the duty of trustee of InvIT to ensure compliance with the provisions of trust deed and InvIT regulations and inform the SEBI in case of non-compliance. Hence it can be said that trustee also has a supervisory duty to check whether the criteria is complied by all parties or not.

This view is also substantiated by SEBI in its orders. One of such orders is in the matter of Sahara Mutual fund, wherein it has stated that trustee was supposed to inform the SEBI about non-compliance of criteria by person in control of sponsor.

Another such order is in the matter of Axis trustee services ltd[8]. In this order SEBI highlighted that the trustee has a regulatory responsibility to independently analyse the compliance with the criteria without relying on the analysis done by IM.

Hence it can be said that, primarily IM is expected to ensure compliance with the criteria along with the supervisory duty on trustee to oversee the compliance.

Practical challenges in ensuring compliance:

Although the compliance officer of the InvIT and the board of the IM may be primarily responsible for ensuring compliance with the criteria, with supervisory oversight by the trustee, there is a practical difficulty in doing so. The criteria apply to multiple entities and individuals, including the sponsor, trustee, PM and other parties to the InvIT, all of whom are separate legal entities. Therefore, it may not be practically possible for the compliance officer to track their compliance at all times. Hence, a feasible oversight mechanism is required to ensure continuous compliance by all parties and to promptly inform the compliance officer of any non-compliance for necessary action.

One such possible solution can be that all the entities who are parties to InvIT, should themselves ensure the compliance with the criteria on their own part as well as on the part of their directors, KMPs and persons in control. They may also give a periodic declaration in this regard to the compliance officer of InvIT. If in case, there takes place any disqualification due to which the entity itself or any of the individuals connected with it, fails to comply with the criteria, that also may be notified to the compliance officer by such entity and the compliance officer in turn would notify the board of IM about said non-compliance.

However, point of caution in this regard is the newly inserted clause 3A of the criteria. As discussed above, the IM is required to disclose to the SEBI within 15 working days about non-compliance with the criteria by any person. Therefore, when any party to InvIT updates the compliance officer of InvIT about non-compliance, care should be taken that whole process of intimating the compliance officer, he informing the board of IM and then IM intimating the SEBI should be completed within 15 working days.

Guidance from NBFC master directions[9]

It is a general practice that, when one law is silent about any particular aspect, reference is made to other laws having similar provisions or purposes. Since InvIT regulations are silent on the aspect of responsibility to ensure compliance with the criteria, reference may be made to other SEBI regulations like REIT regulations or Mutual Fund regulations. However, all these regulations as well are silent in this regard. They require the entities to comply with the criteria but do not fasten the responsibility to ensure compliance on any specific person/entity.hence reference has to be made to RBI master directions to NBFCs.

These master directions require the directors of NBFCs to comply with the fit and proper criteria as prescribed by each NBFC’s policy on fit and proper criteria. The directions also provide a basic list of points to be covered in the criteria and mechanism for overview of compliance with these criteria.

Para 96[10] of the master directions says that the Nomination and Remuneration committee of NBFC shall formulate the policy on fit and proper criteria to be satisfied by the directors at the time of appointment and at all times thereafter. as per point 5[11] of annexure XXIII of master directions the NRC is required to scrutinise the compliance of the criteria by the directors at the time of appointment/re-appointment. also, at the end of each year (at 31^st March), the directors are required to give a simple declaration to NBFC stating that they comply with the criteria and there is no change in information already provided and where there is any change, requisite details are furnished by them forthwith. Further, as per Para 96(4), the managing director of the NBFC is required to give a quarterly declaration to the RBI stating that the criteria are being complied with by all directors.

These provisions make it clear that, as per NBFC master directions, the directors are required to give a declaration to the NBFC that they satisfy the criteria and are also required to notify the NBFC in case of any change in status. Also the provisions make it adequately clear that it is the responsibility of NRC and the managing director to oversee the compliance of criteria by directors. In addition to this, the RBI also retains the right to inspect the fit and proper criteria related parameters for any director in public interest.

Guidance to InVITs:

The guidance that can be taken by InVITs from these provisions of NBFC master directions relates to that of, taking declarations from parties to INVIT and related individuals, and making NRC responsible to oversee compliance with the criteria by all eligible entities and individuals.

Just like NBFCs, the InVITs can take periodic declarations from all the parties to INVIT and the individuals stating that they comply with the criteria and that they would inform the INVIT in case of any change in status (occurrence of disqualification). Also, with respect to NRC, the IM of INVIT is required to constitute a NRC as per regulation 19 of SEBI LODR regulations. The same NRC may be assigned the task of scrutinising the declarations received and overseeing the compliance  with the criteria by all entities/individuals.Since InvITs and ReITs share a same working model, the ReITs may also implement the same compliance mechanism as discussed above in context of InvITs.

Conclusion:

The key challenge in complying with the fit and proper criteria is not, understanding the consequences of non-compliances, but ensuring continuous monitoring across multiple entities and individuals involved in the InvIT/ReIT structure. In the absence of a prescribed oversight framework, InvITs/ReITs may benefit from adopting structured internal mechanisms, such as periodic declarations and defined reporting processes, to ensure timely identification and rectification of non-compliance.

[1] k) the [InvIT and parties to the InvIT] are fit and proper persons based on the criteria as specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008;

[2] k) the [InvIT and parties to the InvIT] are fit and proper persons based on the criteria as specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008;

[3] (2) The ‘fit and proper person’ criteria shall apply to the following persons:

(a) the applicant or the intermediary;

(b) the principal officer, the directors or managing partners, the compliance officer and the key management persons by whatever name called; and

(c) the promoters or persons holding controlling interest or persons exercising control over the applicant or intermediary, directly or indirectly:

[4] k) the [InvIT and parties to the InvIT] are fit and proper persons based on the criteria as specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008;

[5] (25) The investment manager shall designate an employee or director as the compliance officer for monitoring of compliance with these regulations and guidelines or circulars issued hereunder and intimating the Board in case of any non-compliance.

[6] “(3A) If any person under clause (2) is subjected to any event under sub-clause (b) of clause (3), the applicant or intermediary shall inform the Board of the occurrence of such event within fifteen working days of the recognised stock exchanges.

[7] (20)

The trustee shall ensure that the activity of the InvIT is being operated in accordance with the provisions of the trust deed, these regulations and the offer document or placement memorandum and if any discrepancy is noticed, shall inform the same to the Board immediately in writing.

[8] SEBI adjudication order dated 29^th April 2026 in the matter of Axis trustee services ltd.

[9] (3A) If any person under clause (2) is subjected to any event under sub-clause (b) of clause (3), the applicant or intermediary shall inform the Board within seven days of the occurrence of such event.

[10] 96. The NBFC shall

(i) i) ensure that a policy is put in place with the approval of the Board of Directors for ascertaining the ‘fit and proper’ criteria of the directors at the time of appointment, and on a continuing basis. The policy on the ‘fit and proper’ criteria shall be on the lines of the guidelines contained in Annex XXIII;

(ii) obtain a declaration and undertaking from the directors giving additional information on the directors. The declaration and undertaking shall be on the lines of the format given in Appendix XXIII-A;

(iv) furnish to the Reserve Bank a quarterly statement on change of directors, and a certificate from the Managing Director of the NBFC that ‘fit and proper criteria’ in selection of the directors has been followed.

[11] (v) NBFCs shall obtain annually as on 31st March a simple declaration from the Directors that the information already provided has not undergone change and where there is any change, requisite details are furnished by them forthwith.

This Article written by

CS Rutuja Umadikar – Research Associate (RND Team)

This article is published on taxmann link below.

https://www.taxmann.com/research/company-and-sebi/top-story/105010000000028672/fit-and-proper-criteria-in-invits-continuous-compliance-and-oversight-opinion

The post Fit and Proper Criteria in InvITs: Continuous Compliance and Oversight first appeared on MMJC.

Impact of Labour Codes on listed companies

Do Listed Cos Need Separate stock exchange filing even when disclosure of same is already disclosed to stock exchange as board meeting outcome?

The implementation of the new Labour Codes has opened up an important compliance question for listed entities. The issue is not only whether the new framework changes employee cost, gratuity liability, leave encashment, wage structure or compliance processes, the more immediate question for listed entities is, where the impact due to applicability of new Labour code is material, is it sufficient to disclose the impact as a note to financial results, or should a separate disclosure also be made to the stock exchanges under Regulation 30 of the SEBI Listing Regulations?

Applicability of Labour Codes are a change in regulatory framework for all listed entities?

The four Labour Codes brought into force from 21 November 2025 consolidate and replace several earlier Labour laws. Their effect is not merely procedural. The new framework may alter how entities calculate wages, employee benefits, gratuity, leave obligations, social security contributions, contract Labour compliance and other employment-related costs. The actual impact will differ from company to company, depending on the nature of workforce, wage composition, employee mix, use of contract Labour, accounting policy and actuarial assumptions.

This is where the SEBI Listing Regulations have become relevant. Schedule III, Part A, Para B of the SEBI LODR Regulations specifically covers “effect(s) arising out of change in the regulatory framework applicable to the listed entity.” It is an express disclosure category. Therefore, where the Labour Codes create a material effect on a listed entity, the event fall within this item.

Many regulatory changes apply to an entire industry or to a large class of companies. What is relevant for Regulation 30 is not whether the law is entity specific. The relevant test is whether the regulatory change has a material effect on the listed entity. A general law can still have a specific financial or operational impact on a particular company.

When does the disclosure trigger arise?

The trigger should not be mechanically linked only to the date on which the Labour Codes came into force. The event under Para B item 7 is the “effect” arising out of the regulatory change. Therefore, the relevant point for disclosure may be when the listed entity becomes aware of the material effect. Where a company assesses a significant charge towards additional gratuity or leave obligation due to the revised wage definition, the company has reached a stage where the regulatory change has translated into a financial effect. The culmination of this assessment would be in the board meeting where the financial results would get approved.

So, if the provisioning of impact of the effect of Labour code on financial results of an entity is approved in the board meeting along with the financial results of the company for a quarter or half year or year then, it would be correct on the part of the company to disclose the impact of the effect of Labour code along with financial results as a part of the board meeting outcome under Regulation 30 of LODR.

Does every listed entity need to make a stock exchange disclosure when they are discussed in board meeting of the company along with financials?

As discussed, the disclosure obligation under Para B is based on materiality. A listed entity should first assess whether the effect of change in regulatory framework has a material impact on its financial, operations, employee cost structure, liabilities, business model or compliance burden. It may sometime happen that the change in regulatory framework is applicable across industry or sectors, in that case also material impact needs to be ascertained as the impact on listed entity in each sector or industry would vary. In case of an aviation company, an insider was held liable for insider trading when he traded in shares of an airline stock under presumption that it would be beneficial most due to low fuel prices due to falling crude oil prices globally[1].    

If a listed entity carries out an internal assessment and concludes that there is no material financial or operational impact, a separate stock exchange disclosure may not be necessary. However, the basis for this conclusion should be documented internally, preferably through assessment by one or more key managerial personnel under reg. 30(5) of LODR. It also needs to be discussed at the meeting of board of directors that the impact due to regulatory change is assessed and a noting in this regard is taken by board of directors.

On the other hand, if the impact is material, or is likely to be material, the company should evaluate disclosure under Regulation 30 read with Schedule III, Part A, Para B, item 7.

Is separate stock exchange disclosure mandatory for impact of Labour code even when the disclosure of impact of effect of Labour code is being disclosed as outcome of board meeting along with financials of the listed entity?

SEBIs in stock disclosures under regulation 30 of LODR looks at whether the disclosure gave investors a complete and fair picture.

In the Genus Power matter[2], SEBI questioned a disclosure where a large order value was announced but the revenue recognition period was allegedly not disclosed. SEBI’s concern was that investors may be misled if they see a large headline number without understanding that the revenue would be recognized over several years. The company argued that Advanced Metering Infrastructure Service Provider contracts were part of its ordinary course of business, that the standard contract period was available in public domain through government/industry documents, that the disclosure had referred to the company’s total order book, and that the revenue realization period was also discussed in the earnings call transcript filed with the stock exchanges. After considering these facts, the Adjudicating Officer gave the benefit of doubt to the company and held that the alleged violation of Regulation 4(1)(c) and Regulation 4(1)(d) of the LODR Regulations did not stand established. SEBI AO in the matter of Genus Power shows that adequacy of disclosure is fact specific. If the allegedly omitted information is already available in the public domain, has been explained through exchange-filed earnings call transcripts or any other publicly available media forum, is consistent with industry practice, and there is no evidence of misleading investors, SEBI may take a lenient view.

The principle is relevant for Labour Code disclosures as well. If a company recognizes a significant exceptional charge due to the Labour Codes, investors should not be left to guess whether the amount is one-time, recurring, actuarial, cash or non-cash, or whether further impact may follow. SEBI will examine whether investors had access to adequate, accurate and non-misleading information in the facts of the case.

SEBI and SAT have, in certain cases, recognized that information widely reported in mainstream media or otherwise available in the public domain may be “generally available” for the purpose of insider trading analysis[3].

Regulation 30 is built on the principle of equal, timely and formal dissemination through stock exchanges. Therefore, if a listed entity discusses the financial impact of Labour Codes in board meeting along with financial results, then the impact of the Labour code on financials should also be disclosed to stock exchange along with board meeting outcome and no separate disclosure is necessary.

What should the disclosure contain?

For this item, SEBI does not appear to prescribe a detailed event-wise format comparable to certain other Regulation 30 events. That does not mean a company can make a vague disclosure. The disclosure must still satisfy the broader principles of Regulation 30 and Regulation 4. It should be timely, accurate, adequate and not misleading.

A good disclosure should ideally cover the following:

1. the regulatory change, i.e. implementation of the Labour Codes;
2. the date from which the framework became effective;
3. the nature of impact, such as gratuity, compensated absences, provident fund, ESI, wage restructuring, contract Labour or other employee benefit cost;
4. the amount of impact, if quantified;
5. the financial statement line item where the impact is recognized;
6. whether the impact is one-time, recurring, exceptional or still under assessment;
7. the basis of computation, such as actuarial valuation, management estimate or auditor-reviewed assessment;
8. whether the impact is subject to further rules, clarifications or implementation guidance;
9. whether the company expects any further material impact; and
10. whether the company will update the stock exchanges if further material developments arise.

The disclosure should not merely say that “the company has assessed the impact of Labour Codes.” If the impact is material, investors should know what has changed, how much has changed, and how it affects the company’s financial position or performance.

Conclusion

So, if a listed entity has discussed impact of effect of Labour code on financials of a listed entity at the board meeting along with financial results, then it would be sufficient if the impact of the same is being disclosed as part of outcome of board meeting.

[1] SEBI AO in the matter of Spicejet Ltd dt: May 29, 2020. –

[2] https://www.sebi.gov.in/enforcement/orders/mar-2025/adjudication-order-in-the-matter-of-genus-power-infrastructures-limited_93152.html

[3] https://www.sebi.gov.in/enforcement/orders/oct-2020/adjudication-order-in-respect-of-gopal-vittal-bharti-telecom-ltd-rohit-krishan-puri-and-sunil-bharti-mittal-in-the-matter-of-trading-by-certain-entities-in-the-scrip-of-bharti-airtel-limited_47950.html and https://images.assettype.com/barandbench/2023-12/1f7f2efa-175f-4dde-b723-528a2330436f/Future_Corporate_Resources_and_ors_v__SEBI.pdf

This Article written by

CS Vallabh Joshi – Associate Director

This article is published on taxmann link below.

_________________________________________________________

https://www.taxmann.com/research/labour-laws/top-story/105010000000028715/impact-of-labour-codes-on-listed-companies-opinion

The post Impact of Labour Codes on listed companies first appeared on MMJC.

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Introduction

India’s Infrastructure Investment Trust (InvIT) and Real Estate Investment Trust (REIT) market has witnessed significant growth in recent years, with assets under management increasing steadily and SEBI placing greater emphasis on governance standards. Related Party Transactions (RPTs) have consistently remained one of SEBI’s primary governance priorities across listed entities and regulated entities. While the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) prescribe a detailed governance architecture for such transactions, the regulatory framework applicable to InvITs and REITs adopts a significantly moderate approach. This raises an important practical question that, how should InvITs and REITs design an appropriate governance framework where the regulations themselves remain silent?

This article shall analyse, the RPT framework under SEBI (Infrastructure Investment Trust) Regulations, 2014 (InvIT Regulations) and SEBI (Real Estate Investment Trust) Regulations, 2014 (REIT Regulations) in the light of RPT provisions of other matured laws like Companies Act, 2013 (Act) and LODR Regulations.

RPT provisions under InvIT & REIT Regulations

The definition of Related Party (RP) under Reg 2(1)(zv[1]) of the InvIT Regulations and Reg  2(1)(zo[2]) of the REIT Regulations refers to the definitions of RP provided under the Act and Ind AS-24. Other than RPs covered under definitions under these 2 laws vis Ind AS-24 and the Act, the InvIT Regulations/ REIT Regulations also include parties to the InvIT/ REIT (sponsors, Investment Manager (IM), project manager (PM) and Trustee) and their directors, promoters and partners in the list of RPs.

Regulation 19 of the InvIT and REIT Regulations governs Related Party Transactions (RPTs), prescribing the approval requirements for specified transactions, including prior unitholder approval where applicable, and mandating disclosures to the stock exchanges and unitholders. It is further pertinent to note that the Master Circulars issued for InvITs and REITs prescribe the format and manner of disclosure of RPTs to be included in the Annual Report and the Half-Yearly Report.

However, point worth noting is that, there are certain crucial items with respect to RPT, about which the InvIT and REIT Regulations as well as the Master circulars are silent which are discussed further.

What the Regulatory Silence Means for InvITs & REITs in Practice?

• Since the InvIT and REIT Regulations derive concepts from multiple legislative sources rather than prescribing a self-contained framework, a comparative analysis becomes essential to understand both the safeguards incorporated and the gaps that continue to exist such as:
• Unlike the LODR Regulations, the InvIT and REIT Regulations prescribe only a broad framework for RPTs which is not comprehensive. They do not provide detailed guidance on the approval process by audit committee or Board, omnibus approvals, material modifications, minimum information requirements, or even an independent definition of a “Related Party Transaction“.
• Further, LODR Regulations also expressly requires the materiality threshold for RPTs to be assessed both transaction-wise with each related party and on an aggregate basis during a financial year, the InvIT and REIT Regulations remain silent on this aspect. This absence of regulatory guidance leaves the methodology for assessing materiality open to interpretation.
• Also, the exemptions available to listed entities under LODR Regulations in respect of certain RPTs are not expressly extended to InvITs and REITs under their respective regulatory framework.

Following is the tabular representation of comparative analysis.

• In addition to this comparative analysis, if we compare the RPT provisions under InvIT regulations with those under REIT regulations, it is observed that the provisions under REIT regulations are slightly more elaborate as it provide a list of such transactions with related parties which require compliance with RPT provisions and prescribe minimum data to be given in explanatory statement for obtaining unit holder approval.

Practical difficulties faced within the industry

• One such challenge pertains to the identification of related parties. While the InvIT and REIT Regulations refer to the definitions prescribed under the Companies Act, 2013 and Ind AS-24, the practical exercise of identifying related parties across the Parties to the InvITs/ REITs, HoldCos, SPVs and other entities forming part of the trust structure often becomes complex. Further, treating the parent bank of an otherwise professionally independent SEBI-registered Trustee as a related party imposes an additional compliance burden that may not be warranted. This is particularly so as a significant number of banking transactions undertaken with such banks are in the ordinary course of business and are routine in nature.
• Another key practical challenge under the InvIT and REIT Regulations is the absence of an exemption for transactions with wholly owned subsidiaries. Under the LODR Regulations, such exemptions were introduced on the premise that transactions within a wholly owned group structure pose a limited risk of conflict of interest and, therefore, need not be subjected to the same level of regulatory oversight. Consequently, even genuine operational transactions within the group may require additional approvals and disclosures, increasing compliance efforts and timelines without delivering a commensurate governance benefit.
• Absence of express definition of RPTs and the approval mechanisms viz. audit committee or board approval for RPTs means that the level of independent oversight over such transactions largely depends on the governance framework adopted by each InvIT or REIT.
• This complexity is further accentuated where different entities within the structure have evolved independently, each following its own governance culture, organisational structure, internal policies and compliance practices. Accordingly, a consistent and centralised approach towards identification and monitoring of RPTs assumes significant importance.
• To address these gaps, InvITs/ REITs rely on their internal RPT policies and frameworks, absence of which is also highlighted by SEBI during the Periodic Inspections. Thus, having a robust policy is important to mitigate governance concerns or issues.

RPT policy as defence

• In our experience advising InvITs and REITs on governance and compliance matters, an effective RPT policy should not merely reproduce the Regulations but establish a governance process covering identification, approvals, documentation, monitoring and periodic review. It requires each InvIT / REIT to independently determine the scope of its RPT obligations while taking care of the minimum norms prescribed in the Regulations. 
• A review of the RPT policies adopted by InvITs / REITs indicates that most market participants have sought to bridge these gaps by drawing guidance from Regulation 23 of the LODR Regulations. However, there continues to be considerable variation in areas such as the definition of an RPT, approval thresholds, treatment of repetitive transactions, and material modifications.
• Until greater regulatory clarity is provided, adopting a well-defined RPT policy aligned, to the extent appropriate, with the principles of the LODR Regulations offers a practical and defensible approach.

Key Governance Questions Emerging Under the Current Framework to be addressed

• Should every transaction with a related party be treated as an RPT?
• Can omnibus approval concepts be borrowed from LODR?
• How should material modifications be identified?
• What level of independent oversight should be applied?
• How should I justify arms’ length basis for all the RPTs?
• Can any exemptions be given as per the framework for the RPTs with wholly owned subsidiaries?
• Should materiality be assessed transaction-wise or on an aggregated basis over a financial year?

RPT Governance Checklist for InvITs/ REITs

Based on a review of publicly available RPT policies and governance disclosures across listed InvITs and REITs, the following elements represent the current high-water mark of internal governance practice:

• Defined RPT scope — Policy explicitly defines what constitutes an RPT including whether it covers only transactions entered into by the InvIT/REIT with its related parties or also extends to transactions between two related parties of the InvIT/REIT where the InvIT/REIT itself is not a party.
• Periodic Related Party mapping — identification and updating of related parties across the InvIT/REIT structure.
• Audit Committee approval threshold — Transactions above a prescribed value (e.g., ₹1 crore or 1% of consolidated turnover, whichever is lower) require prior Audit Committee approval.
• Board review mechanism — Transactions approved by the Audit Committee are placed before the Board for review at the next meeting.
• Omnibus approval for repetitive transactions — Annual omnibus approval framework for routine, arm’s-length transactions with sponsors, IM, PM, SPVs etc.
• Materiality thresholds for unit holder approval — Clear monetary or percentage-based thresholds triggering unit holder approval, aligned with Regulation 19 of InvIT & REIT Regulations
• Material modification clause — Any revision to an approved RPT that changes value, counterparty, or commercial terms by more than a defined threshold (e.g., 10%) triggers fresh approval, as a recommendation.
• Independent valuation for significant transactions — Transactions above a higher threshold require independent valuation or fairness opinion before approval.
• Minimum disclosure requirements — Audit Committee, Board, Unitholders are given base information as required for the transactions proposed for approvals.
• Parameters or criteria for establishing arms’ length — such as benchmarking with market prices, obtaining independent quotations or valuations, comparison with similar third-party transactions, adherence to approved pricing methodologies, and maintenance of adequate supporting documentation.

Although these measures have contributed towards strengthening governance standards, the approaches adopted continue to differ across entities owing to the absence of a uniform regulatory framework.

Conclusion

The RPT framework for InvITs/ REITs is at an inflection point. SEBI has progressively tightened governance norms for listed entities, and InvITs/ REITs have not been exempt from that trend. While regulatory intervention may eventually address many of the existing gaps, governance cannot wait for legislative change. Until a more comprehensive framework is introduced, the responsibility of ensuring robust oversight rests with the internal governance architecture adopted by each InvIT and REIT. Institutions that proactively strengthen their RPT framework today are likely to be better positioned from both a regulatory and investor confidence perspective.

[1]InvIT Regulations – 2(1)(zv) “related parties” shall be defined under the Companies Act, 2013 or under the applicable accounting standards and shall also include –

(i) parties to the InvIT;

(ii) ***

(iii) promoters, directors and partners of the persons mentioned in clause (i)

[2]ReIT Regulations – 2(1)(zo) “related parties” shall be defined under the Companies Act, 2013 or under the applicable accounting standards and shall also include –

(i) parties to the REIT;

(ii) ***

(iii) promoters, directors and partners of the persons mentioned in clause (i)

This Article written by

CS Jyotika Bhojwani (Manager InvITs team) and CS Rutuja Umadikar (associate R&D team) 

This article is published on Taxguru at the link below.

https://taxguru.in/company-law/rpt-framework-invits-reits-regulatory-gaps-internal-governance.html#google_vignette

The post The RPT Framework for InvITs & REITs: Navigating regulatory gaps through Internal Governance first appeared on MMJC.

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