The SEBI has notified a new set of regulations to amend the existing SEBI (Alternative Investment Funds) Regulations, 2012 which shall come into force on the date of its publication in the Official Gazette i.e., 24th January, 2022. The main aim of this amendment is to introduce the concept of Special Situation Funds.
| Sr. No. | Amendment | Comments | |
| 1 | Insertion: Regulation 3(4)(a)
after the words “infrastructure funds” and before the words “and such other”, the words and symbol “, special situation funds” shall be inserted. |
Regulation 3 of the AIF Regulations provides for registration of Alternative Investment Funds.
By this amendment, the Board has included special situation funds under the Category I Alternative Investment Fund. (Chapter III-B is inserted special situation funds) |
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| 2 | Substitution: Regulation 12(3)
the symbol “.” shall be substituted with the symbol “:”. |
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| 3 | Insertion: after Regulation 12(3)
Provided that the requirements under sub-regulation (2) and (3) shall not apply to large value fund for accredited investors. |
Vide this amendment, the Board has provided that the requirement of filing placement memorandum with the Board through Merchant Banker shall not apply to large value fund for accredited investors.
That is to say, pursuant to sub-regulation (1), the AIF can file the memorandum directly to the Board and shall not be required to comply with the requirements of sub-regulation (2) and (3).
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| 4 | Insertion: after Chapter III-A
CHAPTER III -B SPECIAL SITUATION FUNDS Definitions. 19I. For the purposes of this Chapter, unless the context otherwise requires, the terms defined herein shall bear the meanings assigned to them below and their cognate expressions and variations shall be construed accordingly- (1) “resolution applicant” shall have the same meaning as assigned to it under the Insolvency and Bankruptcy Code, 2016; (2) “special situation asset” includes- (a) stressed loan available for acquisition in terms of Clause 58 of Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 as amended from time to time or as part of a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 or in terms of any other policy of the Reserve Bank of India or Government of India issued in this regard from time to time; (b) security receipts issued by an Asset Reconstruction Company registered with the Reserve Bank of India; (c) securities of investee companies, (i) whose stressed loans are available for acquisition in terms of Clause 58 of the Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 as amended from time to time or as part of a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 or in terms of any other policy of the Reserve Bank of India or Government of India issued in this regard from time to time; (ii) against whose borrowings, security receipts have been issued by an Asset Reconstruction Company registered with the Reserve Bank of India; (iii) whose borrowings are subject to corporate insolvency resolution process under Chapter II of the Insolvency and Bankruptcy Code, 2016; (iv) who have disclosed all the defaults relating to the payment of interest/ repayment of principal amount on loans from banks / financial institutions/ Systemically Important Non-Deposit taking Non-Banking Financial Companies/ Deposit taking Non-Banking Financial Companies and /or listed or unlisted debt securities in terms of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 and such payment default is continuing for a period of at least ninety calendar days after the occurrence of such default: Provided that in case of sub-clauses (iii) and (iv), the credit rating of the financial instruments or credit instruments or borrowings of the company has been downgraded to “D” or equivalent; (d) Any other asset as may be specified by the Board from time to time; (3) “special situation fund” means a Category 1 Alternative Investment Fund that invests in special situation assets in accordance with its investment objectives and may act as a resolution applicant under the Insolvency and Bankruptcy Code, 2016. Applicability. 19J. (1) The provisions of this Chapter shall apply to special situation funds and schemes launched by such special situation funds. (2) All other provisions of these regulations, except clauses (b) and (c) of regulation 10, clauses (a), (c) and (e) of sub-regulation (1) of regulation 15, clause (a) of sub-regulation (1) of regulation 16 and the guidelines and circulars issued under these regulations, unless the context otherwise requires or is repugnant to the provisions of this Chapter, shall apply to the special situation funds, the schemes of special situation funds and their sponsors and managers. Registration of special situation funds. 19K. An applicant may apply for registration as a special situation fund in accordance with the provisions of Chapter II of these Regulations. Investment in special situation funds. 19L. (1) Each scheme of a special situation fund shall have a corpus as may be specified by the Board. (2) The special situation fund shall accept from an investor, an investment of such value as may be specified by the Board. (3) The special situation fund shall not accept investments from any other Alternative Investment Fund other than a special situation fund. Investment by special situation funds. 19M. (1) Special situation funds shall invest only in special situation assets and may act as a resolution applicant under the Insolvency and Bankruptcy Code, 2016: Provided that the special situation fund shall not invest in, i. its associates; or ii. the units of any other Alternative Investment Fund other than the units of a special situation fund; or iii. units of special situation funds managed or sponsored by its manager, sponsor or associates of its manager or sponsor. (2) Any investment by a special situation fund in the stressed loan acquired under clause 58 of the Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 as amended from time to time shall be subject to lock-in period as may be specified by the Board. |
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| 4 | Substitution: First Schedule- Form A clause 1(e)
Category under which the application is made – 1. Category I Alternative Investment Fund-Venture Capital Fund 2. Category I Alternative Investment Fund-Social Venture Fund 3. Category I Alternative Investment Fund-SME Fund 4. Category I Alternative Investment Fund-Infrastructure Fund 5. Category I Alternative Investment Fund – Special Situation Fund 6. Category I Alternative Investment Fund-Other 7. Category II Alternative Investment Fund 8. Category III Alternative Investment Fund |
“Category I Alternative Investment Fund – Special Situation Fund” is added in the application form for registration under Regulation 3 as an AIF. | |
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 24th January, 2022
SECURITIES AND EXCHANGE BOARD OF INDIA (ALTERNATIVE INVESTMENT FUNDS) (AMENDMENT) REGULATIONS, 2022
No. SEBI/LAD-NRO/GN/2022/68.—In exercise of the powers conferred by sub-section (1) of Section 30 read with sub-section (1) of Section 11, clause (ba) and clause (c) of sub-section (2) of Section 11 and sub-section (1) and (1B) of Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, namely, —
1. These Regulations may be called the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2022.
2. They shall come into force on the date of their publication in the Official Gazette.
3. In the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, –
I. in clause (a) of sub-regulation (4) of regulation 3, after the words “infrastructure funds” and before the words “and such other”, the words and symbol “, special situation funds” shall be inserted.
II. In regulation 12,
i. in sub-regulation (3), the symbol “.” shall be substituted with the symbol “:”.
ii. after sub-regulation (3), the following proviso shall be inserted, namely,–
“Provided that the requirements under sub-regulation (2) and (3) shall not apply to large value fund for accredited investors.”
III. After Chapter III-A, the following shall be inserted, namely, –
“CHAPTER III -B
SPECIAL SITUATION FUNDS
Definitions.
191. For the purposes of this Chapter, unless the context otherwise requires, the terms defined herein shall bear the meanings assigned to them below and their cognate expressions and variations shall be construed accordingly,-
(1) “resolution applicant” shall have the same meaning as assigned to it under the Insolvency and Bankruptcy Code, 2016;
(2) “special situation asset” includes,-
(a) stressed loan available for acquisition in terms of Clause 58 of Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 as amended from time to time or as part of a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 or in terms of any other policy of the Reserve Bank of India or Government of India issued in this regard from time to time;
(b) security receipts issued by an Asset Reconstruction Company registered with the Reserve Bank of India;
(c) securities of investee companies,
(i) whose stressed loans are available for acquisition in terms of Clause 58 of the Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 as amended from time to time or as part of a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 or in terms of any other policy of the Reserve Bank of India or Government of India issued in this regard from time to time;
(ii) against whose borrowings, security receipts have been issued by an Asset Reconstruction Company registered with the Reserve Bank of India;
(iii) whose borrowings are subject to corporate insolvency resolution process under Chapter II of the Insolvency and Bankruptcy Code, 2016;
(iv) who have disclosed all the defaults relating to the payment of interest/ repayment of principal amount on loans from banks / financial institutions/ Systemically Important Non-Deposit taking Non-Banking Financial Companies/ Deposit taking Non-Banking Financial Companies and /or listed or unlisted debt securities in terms of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 and such payment default is continuing for a period of at least ninety calendar days after the occurrence of such default:
Provided that in case of sub-clauses (iii) and (iv), the credit rating of the financial instruments or credit instruments or borrowings of the company has been downgraded to “D” or equivalent;
(d) Any other asset as may be specified by the Board from time to time;
(3) “special situation fund” means a Category 1 Alternative Investment Fund that invests in special situation assets in accordance with its investment objectives and may act as a resolution applicant under the Insolvency and Bankruptcy Code, 2016.
Applicability.
19J. (1) The provisions of this Chapter shall apply to special situation funds and schemes launched by such special situation funds.
(2) All other provisions of these regulations, except clauses (b) and (c) of regulation 10, clauses (a), (c) and (e) of sub-regulation (1) of regulation 15, clause (a) of sub-regulation (1) of regulation 16 and the guidelines and circulars issued under these regulations, unless the context otherwise requires or is repugnant to the provisions of this Chapter, shall apply to the special situation funds, the schemes of special situation funds and their sponsors and managers.
Registration of special situation funds.
19K. An applicant may apply for registration as a special situation fund in accordance with the provisions of Chapter II of these Regulations.
Investment in special situation funds.
19L. (1) Each scheme of a special situation fund shall have a corpus as may be specified by the Board.
(2) The special situation fund shall accept from an investor, an investment of such value as may be specified by the Board.
(3) The special situation fund shall not accept investments from any other Alternative Investment Fund other than a special situation fund.
Investment by special situation funds.
19M. (1) Special situation funds shall invest only in special situation assets and may act as a resolution applicant under the Insolvency and Bankruptcy Code, 2016:
Provided that the special situation fund shall not invest in,
i. its associates; or
ii. the units of any other Alternative Investment Fund other than the units of a special situation fund; or
iii. units of special situation funds managed or sponsored by its manager, sponsor or associates of its manager or sponsor.
(2) Any investment by a special situation fund in the stressed loan acquired under clause 58 of the Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 as amended from time to time shall be subject to lock-in period as may be specified by the Board.”
IV. sub-clause (e) of clause 1 of Form A of the First Schedule shall be substituted with the following, namely, –
“(e) Category under which the application is made –
1. Category I Alternative Investment Fund-Venture Capital Fund
2. Category I Alternative Investment Fund-Social Venture Fund
3. Category I Alternative Investment Fund-SME Fund
4. Category I Alternative Investment Fund-Infrastructure Fund
5. Category I Alternative Investment Fund – Special Situation Fund
6. Category I Alternative Investment Fund-Other
7. Category II Alternative Investment Fund
8. Category III Alternative Investment Fund”
AJAY TYAGI, Chairman
[ADVT.-III/4/Exty./601/2021-22]
Footnotes:
1. The Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 were published in the Gazette of India on May 21, 2012 vide No. SEBI/LAD-NRO/GN/2012-13/04/11262.
2. The Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 were subsequently amended on, –
(1) 16th September, 2013 by the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2013 vide No. LAD -NRO/GN/2013-14/24/6573.
(2) 23rd May, 2014 by the Securities and Exchange Board of India (Payment of Fees) (Amendment) Regulations, 2014 vide No. LAD-NRO/GN/2014-15/03/1089.
(3) 26th September, 2014 by the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 vide No. LAD-NRO/GN/2014-15/11/1576.
(4) 14th August, 2015 by the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2015 vide No. SEBI/LAD-NRO/GN/2015-16/011.
(5) 4th January, 2017 by the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2016 vide No. SEBI/LAD/NRO/GN/2016-17/026.
(6) 6th March, 2017 by the Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017 vide No. SEBI/LAD/NRO/GN/2016-17/037.
(7) 1st June, 2018 by the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2018 vide No. SEBI/LAD/NRO/GN/2018/19.
(8) 10th May, 2019 by the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2019 vide No. SEBI/LAD/NRO/GN/2019/16.
(9) 17 April, 2020 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/10.
(10) 19th October, 2020 by the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2020 vide No. SEBI/LAD/NRO/GN/2020/37.
(11) 8th January, 2021 by the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2021 vide No. SEBI/LAD/NRO/GN/2021/01.
(12) 5th May, 2021 by the Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2021 vide No SEBI/LAD-NRO/GN/2021/21.
(13) 3rd August, 2021 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/30.
(14) 3rd August, 2021 by the Securities and Exchange Board of India (Alternative Investment Funds) (Third Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/33.
(15) 13th August, 2021 by the Securities and Exchange Board of India (Alternative Investment Funds) (Fourth Amendment) Regulations, 2021 vide No. SEBI.LAD-NRO/GN/2021/41
(16) 9th November, 2021 by the Securities and Exchange Board of India (Alternative Investment Funds) (Fifth Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/57.
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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.
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