ADVOKS GLOBAL · KENYA
The Capital Markets (Real Estate Investment Trusts) (Collective Investment Schemes) Regulations
72. Distribution requirements of an I-REIT
Edition: 2023-10-06 · In force
72. Distribution requirements of an I-REIT
(1)The REIT manager shall only recommend and the trustee may only make distributions to REIT securities holders from realized gains, realized income or from cash held in the fund which is surplus to the investment requirements of the trust.(2)A trustee of an I-REIT shall, on the recommendation of the REIT manager, subject to a higher minimum being specified in the scheme documents and to the provisions (of these Regulations, distribute, within four months after the end of each financial year, a minimum of eighty percent of the net after tax income, if any, of the fund from sources other than from realized capital gains on the disposal of real estate assets.(3)Net after tax income under paragraph (2) shall be calculated in accordance with the IFRS and tax standards applying in Kenya based on the assumption that, for calculation purposes only, the REIT is subject to the general income tax provisions applicable generally to trusts and the REIT is entitled to similar deductions and allowances, including depreciation.(4)The trustee shall make the distribution of income on the basis proposed by the REIT manager after the trustee has taken into consideration the—(a)income for the period;(b)total returns for the period;(c)liabilities and financial obligations;(d)cash flow available for distribution;(e)need to preserve and maintain the condition of the assets of the real estate investment trust and scheme and to provide for asset replacement;(f)stability and sustainability of distribution of income;(g)investment objective of the I-REIT;(h)distribution policy of the I-REIT; and(i)requirements of the scheme documents.(5)The trustee may, where the distribution is proposed other than on an annual basis based on audited financial accounts, require an audit to be undertaken for the purpose of determining the matters to be considered under paragraph (4) or paragraph (10).(6)Where the trustee is of the opinion that the level of distribution recommended by the REIT manager is not in the interests of REIT securities holders, the trustee shall call a meeting of REIT securities holders for the purposes of approving, by way of ordinary resolution, a lower distribution.(7)The REIT manager shall, where it recommends a distribution lower than eighty percent, submit to the trustee a statement of—(a)the reasons for proposing a lower distribution; and(b)when that minimum distribution level of eighty percent is likely to be restored.(8)Failure by trustee to distribute the income under this regulation as a consequence of the REIT manager not proposing or REIT securities holders not voting to receive a distribution which is below eighty percent, shall not constitute in a breach of these Regulations.(9)Despite paragraph (8) and where the trustee fails to distribute income under this regulation—(a)the I-REIT may cease to be classified as a real estate investment trust scheme for taxation purposes;(b)subject to the scheme documents, the REIT securities holders may institute a cause of action against the trustee or the REIT manager; and(c)the Authority may revoke the authorization issued by it under these Regulations.(10)The REIT manager may propose and the trustee may pay a distribution in excess of the current income where the REIT manager, after consultation with the trustee, certifies on reasonable grounds that—(a)immediately after making such distribution, the l-REIT shall be able to pay, out of the assets of the fund, the liabilities incurred on behalf of the trust as and when they fall due and the projected liabilities for at least the next year; and(b)the payment will not adversely affect the capacity to maintain and preserve the assets.(11)The REIT manager shall—(a)disclose to the trustee, the basis of calculation of the distribution of income proposed under paragraph (10); and(b)report such proposal as part of the continuing disclosure requirements under these Regulations.(12)Nothing in these Regulations shall be construed as preventing the proposal or making of distributions, or the trust deed from providing for the making of distributions more than once as in each financial year.