S-REITs and Business Trusts

  REITs Business Trusts
Vehicle
  • The trust is constituted by the trust deed; the trustee has legal ownership of trust assets and holds them on behalf of the REIT.
  • The trustee and manager are separate and independent entities. The trustee holds the trust assets and the manager manages the trust assets for unitholders’ benefit.
  • The manager is licensed under the Securities and Futures Act (“SFA”). The trustee must be an approved trustee under the SFA, which sets out his duties and liabilities.
  • The trust is constituted by the trust deed; the trustee-manager has legal ownership of trust assets, holds them on behalf of the business trust and manages the trust assets for unitholders’ benefit.
  • The trustee-manager is a single responsible entity, being both the trustee and manager of the trust. The Business Trusts Act sets out the duties and liabilities of the trustee-manager.
Business Activities Acts primarily as a passive investment vehicle (including at least 75% of deposited property in income-producing real estate) Business trusts can engage in any type of business activity, including undertaking active business operations.
Corporate Governance
  • The manager can be removed by a simple majority of unitholders’ votes at general meetings.
  • One-third of the board of directors of the manager should be independent.
  • The audit committee must comprise only non-executive directors, with the majority being independent directors.
  • Listed REITs must hold annual general meetings (“AGMs”) within four months of the end of their financial years. Unitholders have the right to attend AGMs, speak and vote on resolutions.
  • The trustee-manager can be removed only if 75% of unitholders vote in favour.
  • The majority of board directors must be independent from management and business relationships with the trustee-manager. At least one-third of board directors must be independent from management and business relationships with the trustee-manager and from every substantial shareholder of the trustee-manager.
  • The audit committee must comprise at least three directors who must be independent from management and business relationships with the trustee-manager; the majority must be independent from management and business relationships and from every substantial shareholder.
  • Listed business trusts must hold AGMs within four months of the end of their financial years. Unitholders have the right to attend AGMs, speak and vote on resolutions.
Distributions REITs must distribute at least 90% of their specified income to their unitholders to enjoy tax transparency under the Income Tax Act. There is no statutory requirement to distribute a certain percentage of its income, but business trusts may pledge to distribute a certain percentage of income to their unitholders.
Gearing Limit The Code on Collective Investment Schemes sets a 45% cap on gearing. There is no statutory gearing limit, but business trusts may commit to a self-imposed borrowing limit.
Top