a.
All AIFs whether
operating as Private Equity Funds, Real Estate Funds, Hedge Funds, etc. must
register with SEBI under the AIF Regulations.
b.
SEBI (Venture Capital
Funds) Regulations, 1996 (“VCF Regulations”) have been repealed. However,
existing VCFs shall continue to be regulated by the VCF Regulations till the
existing fund or scheme managed by the fund is wound up. Existing VCFs,
however, shall not increase the targeted corpus of the fund or scheme as it
stands on the day of Notification of these Regulations. Such VCFs
may also seek re-registration under AIF regulations subject to approval of
66.67% of their investors by value.
c.
Existing funds not
registered under the VCF Regulations will not be allowed to float any new
scheme without registration under AIF Regulations. However, schemes floated by
such funds before coming into force of AIF Regulations, shall be allowed to
continue to be governed till maturity by the contractual terms, except that no
rollover/ extension or raising of any fresh funds shall be allowed.
d.
Existing funds not
registered under the VCF Regulations which seek registration but are not able
to comply with all provisions of AIF Regulations may seek exemption from the Board
from strict compliance with the AIF Regulations.
Categories of funds
The Regulation seeks to cover all types of funds broadly under 3
categories. An application can be made to SEBI for registration as an AIF under
one of the following 3 categories:-
i. Category I AIF –
those AIFs with positive spillover effects on the economy, for which
certain incentives or concessions might be considered by SEBI or
Government of India or other regulators in India; and which shall include
Venture Capital Funds, SME Funds, Social Venture Funds, Infrastructure Funds
and such other Alternative Investment Funds as may be specified. These
funds shall be close ended, shall not engage in leverage and shall follow
investment restrictions as prescribed for each category. Investment
restrictions for VCFs are similar to restrictions in the existing VCF
Regulations.
ii. Category II AIF – those
AIFs for which no specific incentives or concessions are given by the
government or any other Regulator; which shall not undertake leverage other
than to meet day-to-day operational requirements as permitted in these
Regulations; and which shall include Private Equity Funds, Debt Funds, Fund of
Funds and such other funds that are not classified as category I or III.
These funds shall be close ended, shall not engage in leverage and have no
other investment restrictions.
iii. Category III AIF –
those AIFs including hedge funds which trade with a view to make short term
returns; which employs diverse or complex trading strategies and may employ
leverage including through investment in listed or unlisted
derivatives. These funds can be open ended or close
ended. Category III funds shall be regulated through issuance of directions
regarding areas such as operational standards, conduct of business rules,
prudential requirements, and restrictions on redemption, conflict of interest
as may be specified by the Board.
Other salient features
a.
The Alternative
Investment Fund shall not accept from an investor an investment of value less
than rupees one crore. Further, the AIF shall have a minimum corpus of Rs. 20
crore.
b.
The fund or any scheme
of the fund shall not have more than 1000 investors.
c.
The manager or sponsor
for a Category I and II AIF shall have a continuing interest in the AIF of not
less than 2.5% of the initial corpus or Rs.5 crore whichever is lower and such
interest shall not be through the waiver of management fees.
d.
For Category III
Alternative Investment Fund, the continuing interest shall be not less that 5%
of the corpus or rupees ten crore, whichever is lower.
e.
Category I and II AIFs
shall be close-ended and shall have a minimum tenure of 3 years. However,
Category III AIF may either be close-ended or open-ended.
f.
Schemes may be
launched under an AIF subject to filing of information memorandum with the
Board along with applicable fees.
g.
Units of AIF may be
listed on stock exchange subject to a minimum tradable lot of rupees one crore.
However, AIF shall not raise funds through Stock Exchange mechanism.
h.
Category I and II AIFs
shall not be permitted to invest more than 25% of the investible funds in one
Investee Company. Category III AIFs shall invest not more than 10% of the
corpus in one Investee Company.
i.
AIF shall not invest
in associates except with the approval of 75% of investors by value of their
investment in the Alternative Investment Fund.
j.
All AIFs shall have
QIB status as per SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009.
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