Key amendments made to the SEBI (AIF) Regulations, 2012
SEBI, vide SEBI (AIF) (Amendment) Regulations, 2024 dated January 5, 2024, amended the principal regulations, to mandate AIFs to hold their investments in dematerialised form. This does not apply to:
- investments in instruments which are not eligible for dematerialisation;
- investments held by a liquidation scheme of AIFs that are not available in the dematerialised form; and
- any investments by AIFs and such other schemes of AIFs specified by the SEBI.
Further, a custodian which is an associate of the sponsor or manager of an AIF may act as a custodian for that AIF only when all the following conditions are met:
- the sponsor or manager has a net worth of at least INR 20,000 crore (Indian Rupees twenty thousand crore) at all points of time;
- 50% or more of the directors of the custodian do not represent the interest of the sponsor or manager or their associates;
- the custodian and the sponsor or manager of the AIF are not subsidiaries of each other;
- the custodian and the sponsor or manager of the AIF do not have common directors; and
- the custodian and the manager of the AIF must sign an undertaking that they will act independently of each other in their dealings of the schemes of the AIF.
SEBI, vide SEBI (AIF) (Second Amendment) Regulations, 2024 dated April 25, 2024, amended the principal regulations, to permit Category I and II AIFs to 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 the prescribed conditions by SEBI. Further, SEBI has introduced a dissolution period for a scheme of AIFs following the expiry of the liquidation period, allowing the AIFs to liquidate its unliquidated investments. The dissolution period of a scheme of an AIF must not be more than the original tenure of the scheme and must not be extended in any manner upon expiry of the dissolution period. The scheme of the AIF must not accept any fresh commitment from any investor and must not make any new investment during the dissolution period.
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