Who is Really a Dissenting Unitholder? Rethinking Voting and Exit Rights under REIT and InvIT Framework
[Sarthak and Harsh are students at National Law Institute University Bhopal.]
Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) have become important vehicles for channelising investment into India’s real estate and infrastructure sectors. Given their dispersed ownership structure, protecting unitholder interests assumes particular significance, especially where decisions concerning the sponsor, control, or financial structure of a trust may substantially alter the nature of the underlying investment.
The Securities and Exchange Board of India (SEBI), in its consultation paper, proposed changes to two connected aspects of this framework. First, it proposed to recalculate the 75% unitholder approval threshold on the basis of votes actually cast rather than the value of units held. Second, only unitholders who have voted against a resolution, not merely those who failed to vote in its favour, should qualify as “dissenting unitholders” entitled to an exit option. These proposals were approved in SEBI’s 215th Board meeting and have now been incorporated through amendments to REIT and InvIT regulations.
Read together, these amendments allow a resolution to pass on the strength of an actively participating minority of the register, while excluding from the exit mechanism the very unitholders whose non-participation helped it pass. This article examines that interaction and argues that SEBI, and comparable jurisdictions, should resolve it by asking how they have drawn the line between abstention and dissent elsewhere.
The Amendments, and Where They Interact
The REIT and InvIT regulations require 75% unitholder approval by value for specified matters, including a change in sponsor or control of the sponsor. SEBI has now changed it to measure this threshold against votes cast. The REIT Master Circular and its InvIT counterpart previously defined a “dissenting unitholder” as one who has not voted in favour of a resolution, irrespective of whether present or not. SEBI has now narrowed this to unitholders who have voted against the resolution, with a mandatory disclaimer in the unitholder notice stating that the exit option is available only to those who explicitly vote against.
Consider an REIT with 1,000 units, of which 600 do not vote, 310 vote in favour, and 90 vote against a change of sponsor. Under the proposed mechanism, the resolution passes comfortably, since 77.5% of the 400 votes cast are in favour, against a 75% requirement measured on a base of only 400 units rather than 1,000. Under the amended dissenting-unitholder definition, only the 90 units that voted against qualify for an exit. The 600 silent units neither block the resolution nor gain an exit right. Inaction is priced out of the transaction at both ends.
What Counts as Dissent Elsewhere
On its face, it may appear logical not to treat abstention as dissent, since abstention does not reflect any active opposition, but it is worth testing against how “dissent” is defined where exit or appraisal rights already exist, including within SEBI’s own regulatory framework.
For instance, in the State of Delaware, under Section 262(a) of the Delaware General Corporation Law, a stockholder is entitled to appraisal so long as they have “neither voted in favor” of the merger “nor consented thereto in writing”. Silence suffices, and an affirmative vote against the proposal is not required. Further, the Model Business Corporation Act (MBCA), adopted in 36 American states, similarly provides a framework for appraisal rights. Under §13.21, a shareholder forfeits appraisal rights by voting in favour of, consenting in writing to, or tendering shares in response to the relevant corporate action, and must instead deliver written notice of an intent to demand payment before the vote is taken. Thus, the MBCA does not require an affirmative vote against the corporate action; rather, a shareholder must refrain from affirmatively approving the transaction and comply with this notice procedure.
The UK, by contrast, has no uniform definition. Under Sections 979-991 of the Companies Act 2006, the threshold is whether the shareholder has accepted the offer or not, and inaction preserves the right of dissent. This position is materially different under a scheme of arrangement. Under Section 899, 75% of voter-value or a voter-class majority is required, and non-voters are not included in determining whether the threshold has been met or not. Once the court sanctions the scheme, all shareholders, including those who had abstained or not voted in favour, are bound by it.
However, the answer may lie within SEBI’s own regulatory framework. Its own SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 (ICDR Regulations) have defined “dissenting shareholders”, for the post-listing exit offered when an issuer changes the objects of an initial public offer (IPO), as shareholders who “have voted against the resolution”. This definition is now inserted in Regulation 281A, read with Schedule XX of the ICDR Regulations following SEBI’s 2025 amendment. Therefore, the “voted against” standard is not new to SEBI. If viewed this way, the REIT amendment is not a narrowing of investor protection; it is an alignment exercise, bringing REITs and InvITs in line with how SEBI already defines dissent in the primary equity market.
The comparison, however, is not a straightforward one due to the difference in the nature of investment relationships and participation characteristics. The ICDR Regulations' exit mechanism in a listed company responds to a deviation from the issuer’s original IPO representations/Prospectus. REITs and InvITs, by contrast, invest in pooled vehicles whose returns are derived from the underlying real-estate or infrastructure assets. Their registers may contain substantial institutional and passive holdings, and relevant change-in-sponsor may occur years after the initial investment, during which the units may have substantially switched hands. Therefore, importing the ICDR “voted against” standard into the REIT/InvIT frameworks is difficult to justify without considering the different nature of these investments and pattern of unitholder participation.
Testing the Assumption Against the Data
SEBI in its consultation paper defended the narrower definition of dissent on the ground that REIT and InvIT unitholders have access to remote electronic voting, which makes participation easier. However, it provides no data to support this assumption, and it overlooks that ease of participation does not necessarily lead to greater participation. At Embassy Office Parks REIT’s Eighth Annual Meeting on 24 July 2026, a routine, uncontested meeting to adopt the FY26 financial statements and portfolio valuation, 69,03,46,947 votes were polled out of 94,78,93,743 total outstanding units. Roughly 27% of the register did not participate despite 4 days of remote e-voting and near-unanimous support among those who voted. Similarly, the Raajmarg Investment Trust recorded voting participation of only 43.18% of outstanding units while approving its FY26 financial statement. Therefore, without any additional evidence, it cannot be assumed that access to e-voting increases voter turnout.
Linking the Definition to a Participation Floor
The “voted-against” definition treats meetings with high and low voter turnout alike. Where voter turnout is high, SEBI’s approach appears more coherent, as it limits the exit right to those who actively dissented while leaving only a relatively smaller portion of unitholders, who did not vote. However, the same definition becomes problematic when voter turnout is particularly low, as it would prevent a substantial majority of unitholders who did not participate in the voting from exercising their exit rights, for reasons SEBI’s consultation paper never addresses.
Therefore, SEBI could link the votes-cast basis and the “voted against” definition to a minimum participation floor. If participation falls below the prescribed floor, the “not voted in favour” definition would apply; once the floor is met, the amended regime would apply, and only those who have “voted against” the proposal would have an exit right. A 25% participation floor could be considered, given that SEBI already uses 25% as the minimum public unitholding requirement for listed REITs and InvITs. However, the two thresholds serve different purposes: minimum public unitholding concerns the distribution of ownership, whereas the proposed participation floor would concern the extent to which unitholders have actually participated in a particular decision. The latter would therefore need independent justification as a safeguard against decisions being validated by exceptionally low turnout. This would not treat abstention as dissent; rather, it would prevent a very small proportion of participating unitholders from simultaneously determining the transaction’s outcome, and through the “voted against” standard, limit the availability of the exit right.
A participation floor invites an obvious objection that a passive but organised bloc could frustrate a transaction simply by not voting. That risk is not new. Under the previous value-based threshold, non-voters already function as an effective veto, since a resolution short of 75% of all outstanding units fails regardless of why unitholders did not participate. Further, SEBI’s amendment to accept all tendered units, rather than scaling them down for minimum public unitholding purposes, ensures the exit an eligible unitholder does trigger is not diluted by a liquidity constraint.
Moreover, SEBI’s parallel amendments, permitting either sponsor to bear the exit obligation where a REIT or InvIT has multiple sponsors, and requiring full acceptance of tendered units with a one-year window to restore minimum public unitholding, strengthen the exit mechanism once a unitholder qualifies for it. That only enhances the stakes of the eligibility question, since a more effective exit right that reaches a narrower class of unitholders is not necessarily more protective than a less effective right that reaches a broader one.
Conclusion
SEBI’s changes are not two individual ease-of-doing-business measures. They redefine the line between an active unitholder base and a passive one, at the precise moment a REIT or InvIT switches hands. The consultation paper’s own reasoning, that a scattered and partly passive investor base makes existing voting thresholds difficult to satisfy, applies with equal, if not greater, force to the question of who gets to exit when that threshold is not met. SEBI’s own decade-old ICDR Regulations' framework shows that the “voted against” standard is well within the regulator’s comfort zone, while the global framework shows that it is not the only feasible one. The better course is not to pick a definition of dissent in the abstract, but to test it, as the Embassy REIT numbers suggest SEBI should, against how Indian unitholders actually vote.