SEBI Alternative Investment Funds Fifth Amendment Regulations 2021 [CS Tanveer Singh Saluja]



*SEBI Notification No. SEBI/LAD-NRO/GN/2021/57 Dtd. 09th November, 2021

The SEBI has notified a new set of regulations to amend the existing SEBI (Alternative Investment Funds) Regulations, 2012.

Applicability:

Date of publication: 10th November, 2021

  • This set of regulations shall come into force on 13th day from the date of its publication in the Official Gazette;

  • The amendments to Regulation 15(1)(d) shall come into force on the date of its publication in the Official Gazette.

Sr. No.

Amendment

Comments

1

Insertion: Regulation 2(1)(fa)

“Co-investment” means investment made by a Manager or Sponsor or investor of Category I and II Alternative Investment Fund(s) in investee companies where such Category I or Category II Alternative Investment Fund(s) make investment:

Provided that Co-investment by investors of Alternative Investment Fund shall be through a Coinvestment Portfolio Manager as specified under the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020;”

Vide this amendment, definition of co-investment is inserted in the Regulations which was not defined earlier.

2

Substitution: Regulation 15(1)(b)

The terms of Co-investment in an investee company by a Manager or Sponsor or coinvestor, shall not be more favourable than the terms of investment of the Alternative Investment Fund:

Provided that the terms of exit from the Co-investment in an investee company including the timing of exit shall be identical to the terms applicable to that of exit of the Alternative Investment Fund:

Provided further that the above proviso shall be applicable only for co-investment made from the date of coming into force of this regulation.

Vide this amendment the following changes are introduced in the existing provisions:

a. To widen the scope, coinvestor is also added in addition to manager and sponsor;

b. 1st Proviso is added to provide that the terms of exit from the Co-investment shall be identical to the terms applicable to that of exit of the AIF;

c. 2nd Proviso is added to provide that the 1st proviso shall be applicable from the date of coming into force of this regulation.

3

Substitution: Regulation 15(1)(d)

Category III Alternative Investment Funds shall invest not more than ten per cent of the net asset value in listed equity of an Investee Company and shall invest not more than ten per cent of the investable funds in securities other than listed equity of an Investee Company, directly or through investment in units of other Alternative Investment Funds:

Provided that large value funds for accredited investors of Category III Alternative Investment Funds may invest up to twenty per cent of the net asset value in listed equity of an Investee Company and may invest up to twenty per cent of the investable funds in securities other than listed equity of an Investee Company, directly or through investment in units of other Alternative Investment Funds.

In the existing provisions, Category III AIFs were required to invest not more than 10% of the investable funds in an Investee Company. However, vide this amendment, it is provided that Category III AIFs shall,

- invest not more than 10% (up to 20% in case of large value funds for accredited investors of Category III AIF) of the net asset value in listed equity of an Investee Company;

- invest not more than 10% (up to 20% in case of large value funds for accredited investors of Category III AIF) of the investable funds in securities other than listed equity of an Investee Company.

4

Insertion: Regulation 20(15)

The manager shall not provide advisory services to any investor other than the clients of Coinvestment Portfolio Manager as specified in the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020, for investment in securities of investee companies where the Alternative Investment Fund managed by it makes investment.

Insertion of sub-rule (15) is an addition to the General Obligations.

 
Link to the Official Gazette Notification:  https://egazette.nic.in/WriteReadData/2021/230993.pdf.

Disclaimer: The author is based in Jabalpur and is a Practicing Company Secretary dealing in Corporate, Legal & Taxation services. The information contained in this write up, as provided by the author, is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Author recommends that professional advice is sought before taking any action on specific issues.
 
The author can also be reached at cstanveersaluja@gmail.com.
 
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