Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects fund from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.
CATEGORIES OF AIF
|
Criteria |
Category I AIF |
Category II AIF |
Category III AIF |
|
Categorization |
|
|
|
|
SEBI Registration Fee |
Rs.5,00,000 (Rs. 2,00,000 for Angel Fund) |
Rs.10,00,000 |
Rs.15,00,000 |
|
Continuing Interest by Sponsor / Manager |
Lower of the following amounts: 2.5% of corpus; or Rs.5 crores (Rs. 50 lakhs for Angel Fund) |
Lower of the following amounts: 2.5% of corpus; or Rs.5 crores |
Lower of the following amounts: 5% of corpus; or – Rs.10 crores |
|
Ability to Invest in Listed Securities |
Limited ability for listed investments. Different norms across sub-categories. |
Upto 49.99% investments can technically be done in listed securities. |
Investments upto 100% can be made in listed securities. |
|
Overall restrictions / Compliances |
Moderate |
Low |
High |
|
QIB Status |
Yes [Also, no lock in for investment made prior to IPO if held for at least one year] |
Yes [Also, no lock in for investment made prior to IPO if held for at least one year] |
Yes |
|
Leverage |
No |
No |
Yes (upto 2X leverage / 100% additional exposure permitted) |
|
Investment by DFIs, Insurance Companies, Banks |
Yes, subject to compliance with prescribed norms |
Yes, subject to compliance with prescribed norms |
No |
|
Diversification |
Not more than 25% of the Investible Funds can be invested in a single Portfolio Entity |
Not more than 10% of the Investible Funds can be invested in a single Portfolio Entity. |
|
Close Ended / Open Ended |
Close Ended |
Close Ended |
Open or Close Ended |
Further, the AIF which has been granted registration under a particular category cannot change its category subsequent to registration, except with the approval of the Board |
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Structure of AIF
|
Criteria |
Trust |
Company |
LLP |
|
Compliance |
Low |
High |
Moderate |
|
Client Confidentiality |
High |
Moderate |
Low |
|
Market Practice |
More than 97% of the AIFs are set up as Trusts |
Minimal |
Less than 3% AIFs are set up as LLP |
|
Acceptability with Investors and Distributors |
High |
Low |
Moderate |
|
Ease of Operations |
High |
Low |
Moderate |
|
Mitigation of GST on Management Fee |
Debatable |
No |
Yes |
ELIGIBILITY CRITERIA
ENTITIES NOT TO CONSIDERED FOR AIF REGISTRATION
When construing the provisions related to SEBI, the following types of trusts will not be considered as an AIF:
- Family trusts set up for the benefit of ‘relatives’ as defined under Companies Act 1956;
- ESOP trusts set up under the SEBI (Employee stock option scheme and Employee Stock Purchase Scheme), Guidelines, 1999 or as permitted under Companies Act, 1956;
- Employee Welfare trusts or gratuity trusts set up for the benefit of employees;
- Holding Companies within the meaning of Companies Act;
- Other special purpose vehicles not established by fund managers, including securitization trusts, regulated under a specific regulatory framework;
- Funds managed by Securitisation company or reconstruction company which is registered with Reserve Bank of India under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of security interest Act, 2002;
- Any such pool of funds which is directly regulated by any other regulator In India;
REGISTRATION PROCESS WITH SEBI
Application in Form A
As per Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 for Alternative Fund registration, an applicant shall make an application with SEBI as per regulations in the FORM A along with the cover letter and with other necessary documents. The form has to be properly filed, numbered, duly signed and stamped with the application fee of Rs. 1,00,000/- by way of bank draft in favor of “The Securities and Exchange Board of India”, Payable at Mumbai.
Application Evaluation by SEBI
On the receipt of the application, SEBI will reply within 21 working days to the applicant. For expedite the registration process, an applicant should go through the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012.
Certificate of Registration
- After due satisfaction, application shall be approved by the SEBI and the same shall be informed to the applicant.
- After obtaining SEBI approval, it is required for an applicant to pay registration fee of Rs. 5,00,000/- (In case applicant is not registered with SEBI as a Venture Capital Fund) and Re- registration fees of Rs. 1,00,000/- (In case applicant is registered With SEBI as a Venture Capital Fund) to SEBI by way of bank draft in favor of “The Securities and Exchange Board of India”, Payable at Mumbai.
- SEBI on the receipt of registration/re-registration fees will grant certificate of registration to applicant as an Alternative Investment Fund.
