“Unlock the complexities of Alternate Investment Fund (AIF) Compliances. Dive into the world of CAT I & CAT II regulations, SEBI reporting, quarterly compliance, and annual tax filings. Stay informed and compliant with the evolving AIF landscape.”
Alternate Investment Fund (AIFs) are investment vehicles that pool together funds from multiple investors for the purpose of investing in various assets such as real estate, private equity, hedge funds, or venture capital.
Introduction
Alternate Investment Fund (AIF) Compliance will depend on and vary with each category. For CAT I & CAT II, there is a pass-through status. Category III AIFs have not yet been accorded a Pass-through status.
| AIF has to comply with many regulatory requirements and guidelines set forth by the relevant authorities like SEBI, RBI, FEMA, etc. |
| Let us put light on various compliances the Alternative investment fund has to adhere with |
The Following Compliances are applicable to CAT I & CAT II
| Sr No | Particulars | Description | Act | Due Date |
| 1 | SEBI Quarterly reporting | AIFs will have to submit reports on their activities on a quarterly basis. | SEBI Act, 1992 | The report has to be submitted within 10 days from the end of a quarter |
| 2 | Quarterly Compliance Report to Trustee | It includes all Material information pertaining to (i) Basic details of trust (ii) Contact details of various Entity (iii) Details of the investment committee and Key managerial personnel (iv) Compliance with applicable bodies such as SEBI, RBI, etc | SEBI Act, 1992 | The report has to be submitted within 20 days from the end of a quarter |
| 3 | Annual Compliance Test Report to Trustee | Reporting over the compliances of SEBI Regulations as per SEBI Circular CIR/IMD/DF/14/2014 | SEBI Act, 1992 | Within 30 days from the end of the financial year |
| 4 | Report from Independent Valuer | Report from an Independent valuer stating the value of investments made by AIF every six months, which can be extended to one year on approval of a super majority (equal to or more than 75% contributions made by the contributor’s consent) | SEBI Act, 1992 | Semi-Annually and Annually |
| 5 | PPM Audit | A private Placement Memorandum (“PPM”) is considered an information memorandum for AIFs which contains all the necessary information about the AIFs. PPMs are required to contain all material information about the AIF including with respect to
(i) background of the key investment team of the manager, (ii) targeted investments, (iii) tenure of the AIF or scheme, (iv) investment strategy, (v) risk management tools During PPM Audit, the auditor reports on the working of the AIFs is as per the norms mentioned in the PPM |
SEBI Act, 1992 | Within six months from the end of the financial year |
| 6 | Filing Income tax Form 64C | Statement of income distributed by an investment fund to be provided to the unit holder | Income Tax Act, 1961 | 30th June of the financial year following the previous year |
| 7 | Filing Income tax Form 64D | Statement of income paid or credited by an investment fund to be furnished to the income tax under Section 115UB of The Income Tax Act, 1961 | Income Tax Act, 1961 | 15th June of the financial year following the previous year |
| 8 | Annual Income tax Filing | Annual Income Tax return of AIF | Income Tax Act, 1961 | 31st October of the relevant assessment year |
| 9 | Tax Audit | It is applicable if the business income exceeds INR 1 crore | Income Tax Act, 1961 | 30th September of the relevant assessment year |
| 10 | PPM Changes Intimation to SEBI | Any changes done to the PPM, including modification to be intimated to SEBI along with the report of Merchant Banker | SEBI Act, 1992 | Within 30 days from the end of the financial year |
| 11 | Annual Report to the Investors | Financial information of investee companies;
a. Material risks and how they are managed, which may include i. Concentration risk at fund level; ii. Foreign exchange risk at the fund level; iii. Leverage risk at fund and investee company levels; iv. Realisation risk (i.e. change in exit environment) at fund and investee company levels; v. Strategy risk (i.e. change in or divergence from business strategy) at the investee company level; vi. Reputation risk at the investee company level; and vii. Extra-financial risks, including environmental, social and corporate governance risks, at the fund and investee company level. |
SEBI Act, 1992 | Within 180 days from the year-end |
| 12 | Form InVi | If AIF Issued units to a person resident outside India then AIF shall file the Form InVi with the RBI | RBI Act, 1934 | Within 30 days from the date of issue of units |
| 13 | Form DI | An Indian entity or an investment Vehicle making a downstream investment in another Indian entity which is considered as an indirect foreign investment for the investee Indian entity should file DI Form | RBI Act, 1934 | Within 30 days from the date of allotment of equity instruments |
| 14 | Foreign Liabilities and Assets (FLA) return | It has to be filed with the RBI in lieu of all the foreign investments received and made in the previous year | RBI Act, 1934 | 15 July of the financial year following the previous year |
| 15 | Financial Intelligence Unit, India (FIU-IND) | The Registration of FIU-IND is applicable to those who are liable under the Prevention of Money Laundering Act | Prevention of Money Laundering Act 2002 (PMLA) | Immediate |
| 16 | SAAS Policy Reporting | Software as a Service (SaaS) based solutions, asked all financial sector organizations in India which use SaaS for managing their Governance, Risk and Compliance functions to ensure complete protection and seamless control over the critical systems at their respective organizations by continuous monitoring through direct control and supervision protocol | SEBI Act, 1992
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Half-Yearly Reporting
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Conclusion
Prioritizing robust compliance measures within alternative investment funds is crucial for maintaining trust, meeting regulatory requirements, and safeguarding the interest of investors in an ever-evolving regulatory landscape
They help prevent fraudulent activities, conflicts of interest, and other unethical practices that can harm investors’ capital. Compliance measures can include strict due diligence processes, thorough disclosure requirements, independent audits, and ongoing monitoring of fund activities. These measures provide investors with greater confidence that their investments are being managed in their best interests.
Authors:
Vaibhav Kothari | Associate Consultant | Email: [email protected]
Varsha Dhake | Manager | Email: [email protected]
Shreyans Dedhia | Partner | Email: [email protected]
Author Bio
