SEBI examines whether an InvIT's Investment Manager, through director appointment powers, becomes a holding company of SPVs, triggering consolidation and disclosure requirements.
Investment Manager as Holding Co of SPV: InvIT Case
A key structural question before SEBI involves whether an Infrastructure Investment Trust’s (InvIT) Investment Manager becomes a holding company of Special Purpose Vehicles (SPVs) due to its power to appoint directors. If so, it may trigger financial consolidation and enhanced disclosure under accounting standards and SEBI regulations.
The determination hinges on whether the Investment Manager exercises de facto control, even without equity ownership. Ind AS 110 defines control based on power, exposure to variable returns, and the ability to use power to affect returns. SEBI is analyzing whether directorial control, combined with management rights, meets this threshold.
This issue impacts InvIT structuring and financial reporting. Legal advisers must assess control implications when drafting management agreements. If deemed a holding company, Investment Managers may face consolidated liability, audit requirements, and intercompany transaction disclosures, affecting investor perception and regulatory compliance.
