On Oct. 8, 2024, IND SEBI issued circular on specific due diligence for AIF investors and investments, covering due diligence required for AIFs, managers, key personnel.
Aims to prevent facilitation of circumvention of regulatory frameworks in various areas.
Addresses four main areas of regulatory concern: qualified institutional buyers (QIBs) benefits under IND SEBI (Issue of capital and disclosure requirements) regulations.
In addition, qualified buyers (QBs) benefits under Securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 (SARFAESI act).
IND RBI prudential norms for regulated lenders, investments from countries with border with India per Foreign exchange management (non-debt instruments) rules.
Due diligence requirements for QIB and QB benefits to apply for schemes with 50% or more contribution from a single investor or investors belonging to the same group.
Requirements to also apply for RBI regulated entities in various listed configurations.
Due diligence standards to be formulated by Standard Setting Forum for AIFs (SFA).
Existing investments to be reviewed and reported to custodians by Apr. 7, 2025, wherein AIFs to report investments resulting in 10%+ holding in investee entities.
Custodians to compile, report AIF-reported information to IND SEBI by May 7, 2025.
This circular (of Oct. 8) shall come into force on Oct. 8, 2024, being the day issued.
On Apr. 25, IND SEBI issued second amendment regulations, 2024.
IND SEBI issued (alternative investment funds) (second amendment) regs, 2024, which make amendments to the SEBI (alternative investment funds) regulations 2012.
Follows IND SEBI Jan. 2024 issued proposals for fund flexibility, see #197958.
Amendments aim to provide more flexibility for AIFs to deal with unliquidated assets and more ease to create encumbrance on holding of equity in investee companies.
Effectiveness
Amendments shall come into force on the date of publication in the Official Gazette.
Apr. 26, 2024 Circulars on Flexibility
On Apr. 26, 2024 IND SEBI issued two circulars regarding the amendments related to additional flexibility to deal with unliquidated assets and framework for category I and II AIFs to create encumbrance on their holding of equity of investee companies.
The amendments aim to provide additional flexibility to alternative investment funds and their investors to deal with unliquidated investments of their schemes.
Outlines requirements for the dissolution period, mandatory in-specie distribution of unliquidated investments, compliance responsibility, and 1-time flexibility to schemes of AIFs whose liquidation period has expired, to deal with unliquidated investments.
As well as discontinuation of the option of launching liquidation scheme.
The amendments also aim to provide ease of doing business and flexibility to category I and II AIFs to create encumbrance on their holding of equity in investee companies.
This should help to facilitate raising of debt by such investee companies.
Accordingly, in terms of provisos to regulation 16(1)(c)and 17(c) of AIF regulations, category I and II AIFs may create encumbrance on equity of investee company.
The company must be in the business of development, operation or management of projects in any of the infrastructure sub-sectors listed in the Harmonised Master List of Infrastructure issued by Central Government, only for borrowing by investee company.
This is subject to such conditions as may be specified by the board from time to time.
Jul. 2024 Dissolution Period
On Jul. 9, 2024, IND SEBI issued circular regarding information memorandum to be filed by schemes of AIFs availing dissolution period and additional liquidation period.
The circular also covers the conditions for in specie distribution of assets of AIFs.
AIF scheme entering into dissolution period shall file an information memorandum with IND SEBI through a merchant banker in the manner as may be specified by IND SEBI.
The information memorandum shall be submitted to IND SEBI before expiry of the liquidation period or additional liquidation period of the scheme, as the case may be.
Specifies the format for information memorandum and due diligence certificate.
AIF schemes intending to avail the additional/fresh liquidation period, shall submit information to SEBI with specified format, for granting additional liquidation period.
For in specie distribution of investments of AIFs, it shall be carried out after obtaining approval of at least 75% of the investors by value of their investment in the scheme.
The trustee/ sponsor shall ensure that the compliance test report prepared by the manager in terms of chapter 15 of the master circular dated May 7, 2024 for AIFs, see #181016, is also compliant with the provisions of this circular.
The published circular shall come into force with immediate effect, i.e., Jul. 9, 2024.
In Aug, 2024, IND SEBI issued 4th amendments on AIF regulations, see #222357.
Oct. 2024 Circular on Specific Due Diligence
On Oct. 8, 2024, IND SEBI issued circular on specific due diligence for AIF investors and investments, covering due diligence required for AIFs, managers, key personnel.
Aims to prevent facilitation of circumvention of regulatory frameworks in various areas.
Addresses four main areas of regulatory concern: qualified institutional buyers (QIBs) benefits under IND SEBI (Issue of capital and disclosure requirements) regulations.
In addition, qualified buyers (QBs) benefits under Securitisation and reconstruction of financial assets and enforcement of security interest act, 2002 (SARFAESI act).
IND RBI prudential norms for regulated lenders, investments from countries with border with India per Foreign exchange management (non-debt instruments) rules.
Due diligence requirements for QIB and QB benefits to apply for schemes with 50% or more contribution from a single investor or investors belonging to the same group.
Requirements to also apply for RBI regulated entities in various listed configurations.
Due diligence standards to be formulated by Standard Setting Forum for AIFs (SFA).
Existing investments to be reviewed and reported to custodians by Apr. 7, 2025, wherein AIFs to report investments resulting in 10%+ holding in investee entities.
Custodians to compile, report AIF-reported information to IND SEBI by May 7, 2025.
This circular (of Oct. 8) shall come into force on Oct. 8, 2024, being the day issued.
