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CS Professional · Strategic Management and Corporate Finance · Infrastructure Investment Trusts

An InvIT proposes to acquire an infrastructure asset from an entity that is a related party of the sponsor. Which approach is consistent with the SEBI InvIT Regulations on related party transactions?

The InvIT should obtain an independent valuation, make proper disclosures, and secure unitholder approval by the required majority where the deal crosses the prescribed threshold, with related parties not voting. Approval by the board or trustee alone, or disclosure only after completion, is insufficient.

  1. AProceed on the investment manager board's approval alone, since related party deals are exempt
  2. BObtain valuation from an independent valuer, make disclosures, and, where the transaction crosses the prescribed threshold, obtain unitholder approval by the required majorityCorrect
  3. CSeek approval only from the trustee without any valuation
  4. DDisclose the deal to unitholders only after completion in the annual report

Explanation

Related party transactions require independent valuation, timely disclosure and, above prescribed thresholds, unitholder approval by the required majority (with related parties not voting). Board-only approval, trustee-only approval or post-facto disclosure do not meet the safeguards.

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