On Mar. 3, 2025, IND SEBI said the reporting deadline is extended to Mar. 31, 2025.
On Nov. 18, IND SEBI amended AIF regs on grant of differential rights.
IND SEBI issued SEBI (alternative investment funds) (fifth amendment) regulations, 2024, amending the 2012 AIF regulations to regulate the grant of differential rights.
Key Changes
The amendment regulations introduce pro-rata rights for investors based on their commitment to the scheme in terms of both investments and distribution proceeds.
Differential rights can be offered to select investors under specified conditions without affecting others’ interests; large value funds for accredited investors are excluded.
The objective of the amendments is to enhance transparency and fairness in AIF operations while providing flexibility for specific investor categories.
Effectiveness
The regs come into force on publication in the IND GVT gazette, on Nov. 18, 2024.
Existing schemes issued before Nov. 18, 2024 which deviate from these provisions will be addressed in accordance with further directions issued by SEBI.
Dec. 2024 Pro-Rata and Pari-Passu rights
On Dec. 13, 2024, IND SEBI said the amended AIF regs ensure pro-rata, pari-passu rights for investors; investors are entitled to pro-rata rights based on commitment.
Exceptions to maintaining pro-rata rights apply when investors share returns/ profits.
Also specific entities like managers, sponsors, development financial institutions, state industrial corporations, sovereign funds can accept lower returns or higher losses.
Existing AIFs using a priority distribution model are prohibited from accepting new commitments or making new investments unless exempted under the revised rules.
Investors' rights, other than pro-rata rights, must be pari-passu in all aspects unless differential rights are offered transparently, without affecting other investors' interests.
Differential rights may not impose liabilities on other investors, alter existing investor rights, or provide control to specific investors, except in specific cases.
Standard setting forum for AIFs (SFA) will define positive list of permissible differential rights in consultation with SEBI; these standards will be published by Jan. 15, 2025.
Managers must report any differential rights not aligned with SFA standards to SEBI and immediately terminate those that negatively impact other investors.
Large value funds for accredited investors may exempt pari-passu requirements, with investor waivers disclosed in private placement memorandum (PPM).
The circular is effective immediately on Dec. 13, 2024.
Mar. 2025 Deadline Extension
On Mar. 3, 2025, IND SEBI said the reporting deadline is extended to Mar. 31, 2025.
Regulators
IND SEBI
Entity Types
B/D; IA; Inv Co
Reference
Cir SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/29, 3/3/2025; Cir SEBI/HO/AFD/AFD-POD-1/P/CIR/2024/175, 12/13/2024; OG No. 920, Nt SEBI/LAD-NRO/GN/2024/209, 11/18/2024
