Alternative Investment Fund Registration

What is Alternative Investment Fund (AIF) Registration?
AIF Registration is hassle free process in India for setting up Angle fund,
VC .e.t.c
Securities and Exchange Board of India (Alternative Investment

Funds) Regulations, 2012 refers to a set of regulations which were
introduced by Securities and Exchange Board of India (SEBI) in 2012, for
the purpose of regulating pooled investment funds in India, such as real
estate, private equity, and hedge funds. These regulations were introduced
to bring unregistered funds under the ambit of law.
Under this, Alternative Investment Funds refers to a fund established in the

form of trust, company, limited liability partnership or body corporate.
 A privately pooled investment vehicle which collects funds from

investors in accordance with a defined investment policy for the benefit of
investor, whether Indian or foreign.
 Not covered under the Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996, Securities and Exchange Board of India
(Collective Investment Schemes) Regulations, 1999 or any other
regulations of the Board to regulate fund management activities.
Alternative Investment Funds (AIF) have been classified into three following
categories:
 Category I
These type of funds invest in startups and receive incentives from the
SEBI, government or other regulating agencies. This consist social venture
funds, infrastructure funds, venture capital funds and SME funds.
 Category II
These type of funds are allowed to invest in any combination anywhere but
they are not allowed to undertake borrowings except for the purpose of
day-to-day operations. This includes funds such as private equity funds and
debt funds.
 Category III
It also includes funds which make short-term investments and then sell
such as hedge funds.
For the purpose of SEBI regulations, provided that the following shall not
be considered as Alternative Investment Fund:
 family trusts set up for the benefit of ‘relatives’ as defined under

Companies Act, 1956;
 ESOP Trusts set up under the Securities and Exchange Board of
India (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 Section 4 of the
Companies Act, 1956;
 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 the Reserve Bank of India under Section 3 of the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002; and
 any such pool of funds which is directly regulated by any other
regulator in India;
AIF Registration Process with SEBI-
 Application in Form A
As per Securities and Exchange Board of India (Alternative Investment
Funds) Regulations, 2012 for Alternative Investment Fund registration, an
applicant will make application with SEBI as per the regulations in the Form
A along with the cover letter and with the other necessary documents.
 Application Evaluation by SEBI
On the receipt of the application, SEBI will reply within 21 working days to
the applicant. However for the purpose of registration time depends upon
the requirements complied by the applicant.
 Ensure SEBI Compliances
For expedite the registration process, an applicant should go through the

Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012.
 Cover Letter
Here are the following details must be mentioned by the applicant in the
cover letter:
1. Whether it is registered with SEBI as a Venture Capital Fund or not

and if yes, then provide details.
2. Prior to the application, whether it has been undertaking activities of
an AIF. If yes, then provide details.
3. Applying for registration of a new fund.
 Authorization Letter
In case of an Authorized signatory, there is a requirement of submission of

an authorization letter from the Directors/Trustees/Designated Partners of
the Fund.
 Payment of registration fee to SEBI
For registration, an online application shall be filed according to the

guidelines prescribed by SEBI. An applicant will submit form A, which has
to be properly filled, 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.
 Certificate of Registration
1. For granting certificate of registration SEBI shall consider

requirements specified in regulations. After satisfaction, application
shall be approved by the SEBI and inform the applicant of the same.
2. 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.
3. SEBI on the receipt of registration/ re-registration fees, will grant
certificate of registration to applicant as an Alternative Investment
Fund.
Compliances
 After registration Alternative Investment Fund must comply with the

reporting requirements specified by SEBI from time to time.
 For any updating/ circulars/ guidelines issued by SEBI with respect to
the Alternative Investment Fund activity, an AIF must check the SEBI
website on regular intervals.
 In case of any material change in the details already furnished to
SEBI, AIF must intimate to SEBI within a reasonable period of time.
For AIFs fund raising and investment restrictions
 Through private placement, AIFs raise funds and they are not
allowed to accept investment of value less than Rs. 1 Cr from an investor.
More than 1000 investors are not allowed under this fund and each
Scheme should have a corpus of Rs. 20 Crore.
 Another requirement is that manager or sponsor/ promoter of the AIF
should have a continuing interest of not less than 2.5% of the initial corpus
or Rs.5 crore whichever is lower in the AIF.
 In Category I and II of AIFs are not permitted to invest more than
25% of the investible funds in one Investee Company while it is 10% for
Category III AIFs.
 Units of close ended AIFs are allowed to be listed on a stock
exchange subject to a minimum tradable lot of 1Crore rupees but only after
final close of the fund or scheme.
 It is required for all AIFs to comply with the reporting norms of SEBI
on a quarterly basis (for Category I, II AIFs and for those Category III AIFs
which do not employ leverage) or on a monthly basis (for Category III AIFs
which employ leverage).
Category III AIFs also have to additionally comply with norms pertaining to
risk management, compliance, redemption and leverage as specified in the
circular. The leverage for a Category III AIF is specified not to exceed 2
times i.e. the gross exposure after offsetting for hedging and portfolio
rebalancing transactions should not exceed 2 times the NAV of the fund.
Legal forms in which AIF can be set up
According to SEBI (Alternative Investment Funds) Regulations, 2012 AIFs

can be established or incorporated in the form of a trust or a company or a
limited liability partnership or a body corporate. Generally most of the AIFs
registered with SEBI as trust.
Corpus of the AIF
“Corpus’’ is the total amount of funds which is committed by investors as on

a particular date to the AIF by way of a written contract or any such
document.
Limit specified regarding number of investors under AIF regulations
 No scheme of an AIF (other than angel fund) shall have more than
1000 investors.
(Provided that the provisions of the Companies Act shall apply to the AIF if
it is formed as a company).
 No scheme shall have more than forty-nine angel investors in case of

an angel fund.
 However, an AIF can raise funds from the sophisticated investors
only through private placement and cannot make invitation to the public at
large to subscribe its units.
Sponsor of the AIF
‘’Sponsor’’ is a person who set up AIF and includes promoter in case of a

company and designated partner in case of a limited liability partnership.
Validity of the certificate of registration of an AIF
The certificate of registration of an AIF shall be valid till the AIF is wound
up.
Redressal of Complaints-
SEBI has a web based centralized grievance redress system “SEBI

Complaint Redress System (SCORES)” where investors can lodge their
complaints against AIFs.
For dispute resolution, it is required for AIF or through Manager or Sponsor

to lay down procedure for resolution of disputes between the investors, AIF,
Manager or Sponsor through arbitration or any such mechanism as
mutually decided between the investors and the AIF.

Alternative Investment Fund Registration

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Alternative Investment Fund Registration

Uploaded by

Copyright:

Available Formats

What is Alternative Investment Fund (AIF) Registration?

Securities and Exchange Board of India (Alternative Investment

Under this, Alternative Investment Funds refers to a fund established in the

 A privately pooled investment vehicle which collects funds from

 family trusts set up for the benefit of ‘relatives’ as defined under

AIF Registration Process with SEBI-

 Application Evaluation by SEBI

 Ensure SEBI Compliances

For expedite the registration process, an applicant should go through the

1. Whether it is registered with SEBI as a Venture Capital Fund or not

In case of an Authorized signatory, there is a requirement of submission of

 Payment of registration fee to SEBI

For registration, an online application shall be filed according to the

1. For granting certificate of registration SEBI shall consider

 After registration Alternative Investment Fund must comply with the

For AIFs fund raising and investment restrictions

Legal forms in which AIF can be set up

According to SEBI (Alternative Investment Funds) Regulations, 2012 AIFs

Corpus of the AIF

“Corpus’’ is the total amount of funds which is committed by investors as on

Limit specified regarding number of investors under AIF regulations

 No scheme shall have more than forty-nine angel investors in case of

‘’Sponsor’’ is a person who set up AIF and includes promoter in case of a

Validity of the certificate of registration of an AIF

SEBI has a web based centralized grievance redress system “SEBI

For dispute resolution, it is required for AIF or through Manager or Sponsor

You might also like