The Securities and Exchange Board of India (SEBI) has introduced the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2024, bringing significant changes to the alternative investment landscape. These amendments aim to refine regulations governing Alternative Investment Funds (AIFs) to ensure investor protection and market integrity.
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 25th April, 2024
SECURITIES AND EXCHANGE BOARD OF INDIA (ALTERNATIVE INVESTMENT FUNDS)
(SECOND AMENDMENT) REGULATIONS, 2024
No. SEBI/LAD-NRO/GN/2024/168.—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) (Second Amendment) Regulations, 2024.
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 regulation 2, in sub-regulation (1),
i) after clause (i), the following new clauses shall be inserted, namely, –
“(ia) “dissolution period” means the period following the expiry of the liquidation period of the scheme for the purpose of liquidating the unliquidated investments of the scheme of the Alternative Investment Fund.
(ib) “encumbrance” shall have the same meaning as assigned to it under chapter V of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.”
ii) in clause (pb), the words “for fully liquidating the scheme” shall be omitted.
II. In regulation 16, in sub-regulation (1), in clause (c), the following new proviso shall be inserted, namely, –
Provided that Category I Alternative Investment Funds may create encumbrance on equity of investee company, which is in the business of development, operation or management of projects in any of the infrastructure sub-sectors listed in the Harmonised Master List of Infrastructure issued by the Central Government, only for the purpose of borrowing by such investee company and subject to such conditions as may be specified by the Board from time to time.”
III. In regulation 17, in clause (c), the following new proviso shall be inserted, namely,–
“Provided that Category II Alternative Investment Funds may create encumbrance on equity of investee company, which is in the business of development, operation or management of projects in any of the infrastructure sub-sectors listed in the Harmonised Master List of Infrastructure issued by the Central Government, only for the purpose of borrowing by such investee company and subject to such conditions as may be specified by the Board from time to time.”
IV. In regulation 20, after sub-regulation (19), the following new sub-regulation (20) shall be inserted, namely, –
“(20) Every Alternative Investment Fund, Manager of the Alternative Investment Fund and Key Management Personnel of the Manager and the Alternative Investment Fund shall exercise specific due diligence, with respect to their investors and investments, to prevent facilitation of circumvention of such laws, as may be specified by the Board from time to time.
Explanation: “laws” shall include Acts, Rules, Regulations, Guidelines or circulars framed thereunder that are administered by a financial sector regulator, including those administered by the Board.”
V. In regulation 29,
i) In sub-regulation (9), the words “sell such investments to a liquidation scheme” shall be replaced by the words “enter into dissolution period”.
ii) after sub-regulation (9), the following new sub-regulations (9A) and (10) shall be inserted, namely, –
“(9A) If the liquidation period for a scheme of an Alternative Investment Fund has expired or is expiring within three months from the date of notification of the Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2024, such schemes may be granted an additional liquidation period, subject to such conditions and in the manner as may be specified by the Board:
Provided that the additional liquidation period granted under sub-regulation (9A) shall be without prejudice to the issuance of any direction or measures in accordance with the provision of the Act and regulations framed thereunder.
(10) If the scheme of an Alternative Investment Fund enters into a dissolution period as provided under regulation 29B and the unliquidated investments of the scheme are not sold by the expiry of the dissolution period, such investments shall be mandatorily distributed in-specie to the investors, in the manner as may be specified by the Board.”
iii) the existing sub-regulation (10) shall be renumbered as (11).
VI. In regulation 29A, after sub-regulation (7), the following new sub-regulation (8) shall be inserted, namely, –
“(8) No Alternative Investment Fund shall launch any new liquidation scheme under this regulation after the notification of the Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2024:
Provided that any liquidation scheme launched by an Alternative Investment Fund prior to the notification of the Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2024 shall continue to be governed by regulation 29A and the other provisions of these regulations till such schemes are wound up.”
VII. After regulation 29A and before regulation 30, the following regulation shall be inserted, namely,-
“Dissolution Period.
29B. (1) A scheme of an Alternative Investment Fund may enter into a dissolution period in the manner and subject to such conditions as may be specified by the Board.
(2) The scheme entering into a dissolution period shall file an information memorandum with the Board through a merchant banker in the manner as may be specified by the Board.
(3) The dissolution period of a scheme of an Alternative Investment Fund shall not be more than the original tenure of the scheme and shall not be extended in any manner upon expiry of the dissolution period.
(4) The scheme of the Alternative Investment Fund shall not accept any fresh commitment from any investor and shall not make any new investment during the dissolution period.”
BABITHA RAYUDU, Executive Director
[ADVT.-III/4/Exty./046/2024-25]
Footnote:
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, –
(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
(i) 17th April, 2020 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/10.
(j) 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.
(k) 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.
(l) 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.
(m) 3rd August, 2021 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/30.
(n) 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.
(o) 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.
(p) 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.
(q) 24th January, 2022 by the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/68.
(r) 16th March, 2022 by the Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/75.
(s) 25th July, 2022 by the Securities and Exchange Board of India (Alternative Investment Funds) (Third Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/89.
(t) 15th November 2022, by the Securities and Exchange Board of India (Alternative Investment Funds) (Fourth Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/105.
(u) 9th January 2023, by the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/113.
(v) 18th January 2023, by the Securities and Exchange Board of India (Change in Control in Intermediaries) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/115.
(w) 7th February 2023, by the Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/121.
(x) 15th June 2023, by the Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/132.
(y) 3rd July 2023, by the Securities and Exchange Board of India (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/137.
(z) 17th August 2023, by the Securities and Exchange Board of India (Facilitation of Grievance Redressal Mechanism) (Amendment) Regulations, 2023 vide No. SEBI/LAD-NRO/GN/2023/146.
(aa) 5th January 2024, by the Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2024 vide No. SEBI/LAD-NRO/GN/2024/163.
