Know All about Alternative Investment Fund

Last Updated On: Feb. 20, 2021, 9:41 p.m.
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ALTERNATIVE INVESTMENT FUND

What is an Alternative Investment Fund?

Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle that collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.

AIF does not include funds covered under the SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999 or any other regulations of the Board to regulate fund management activities. Further, certain exemptions from registration are provided under the AIF Regulations to family trusts set up for the benefit of 'relatives‘ as defined 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 etc.

 

Categories an applicant can seek Registration as AIF:

· Category I AIF:

AIFs which invest in start-up or early-stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable and shall include venture capital funds, SME Funds, social venture funds, infrastructure funds and such other Alternative Investment Funds as may be specified.

o Venture capital funds (Including Angel Funds)

o SME Funds

o Social Venture Funds

o Infrastructure funds

· Category II AIF:

AIFs which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012.

· Category III AIF:

AIFs employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives.

 

HOW TO GET REGISTERED AS AN ALTERNATIVE INVESTMENT FUND:

1. The Applicant for grant of registration as an Alternative Investment Fund under SEBI (Alternative Investment Funds) Regulations, 2012 should make an application to SEBI in Form A as provided in the Regulations along with all the necessary documents.

2. Generally on receipt of Application, the applicant will receive a reply from SEBI within 21 working days. The time taken for registration however, depends on how fast the requirements are complied with by the applicant.

3. The applicant is advised to go through the SEBI (Alternative Investment Funds) Regulations, 2012 for checking the eligibility criteria and such other details which may help expedite the registration process.

4. The applicant must mention in the covering letter whether:

a. It is registered with SEBI as a Venture Capital Fund. If yes, provide details.

b. It has been undertaking the activities of an AIF prior to such application. If yes, provide details.
c. It is applying for registration of a new fund.

5. As an integral part of the registration process, the applicant will submit the following a. Form A appropriately filled, numbered, duly signed and stamped. b. Application fees of Rs.1,00,000/- by way of bank draft in favour of “The Securities and Exchange Board of India”, payable at Mumbai. 6. The applicant shall also make an online application in terms of the guidelines as prescribed by SEBI from time to time.

 

COMPLIANCES AFTER REGISTRATION:

1. Once registered, the AIF must comply with the reporting requirements as specified by SEBI from time to time.

 2. The AIF must regularly check the SEBI website for any updation/ circulars/ guidelines issued from SEBI from time to time with respect to the AIF activity.

 3. The AIF must intimate to SEBI any material change in the details already furnished to SEBI within a reasonable period of time.

 

ELIGIBILITY CRITERIA:

An AIF which has been granted registration under a particular category cannot change its category subsequent to registration, except with the approval of the Board.

The memorandum of association of a company permits it to carry on the activity of an Alternate Investment Fund (AIF).

The applicant is prohibited by its MOA and AOA from making an invitation to the public to subscribe to its securities.

The AIF shall not carry on any other activity other than permitted activities.

 

INVESTMENT CONDITIONS AND RESTRICTIONS:

The AIF may raise funds from any investor whether Indian, foreign, or non-resident Indians by way of the issue of units.

Each scheme of the AIF shall have a corpus of at least 20 crore Rupees.

The AIF shall not accept from an Investor, an investment of value less than 1 Crore Rupees.

No scheme of the AIF shall have more than 1000 Investors.

The Fund shall not solicit or collect funds except by way of private placement by the issue of information memorandum or placement memorandum.

 

INFORMATION/ DETAILS REQUIRED FOR APPLICATION:

  • Form- A (Application for grant of certificate of Registration as AIF)
  • Name and registered address, correspondence address, principal place of Business, mobile number, email id, fax number of the applicant.
  • Name, email id, mobile No and email Id of the contact person.
  • Date and place of Incorporation
  • Category under which the application is made:
  • Category I AIF- Venture Capital Fund
  • Category I AIF- Social Venture Fund
  • Category I AIF- SME Fund
  • Category I AIF- Infrastructure Fund
  • Category I AIF- Other
  • Category II AIF
  • Category III AIF

 

 

DETAILS OF SPONSOR(S) (Who setup the AIF and includes Promoters in case of a company):

  • Name and registered address, correspondence address, principal place of Business, mobile number, email id, fax number of Sponsor.
  • Name, email id, mobile No and email Id of the contact person.
  • The legal status of Sponsor and date and place Incorporation of Sponsor.
  • Self-attested ID and Address proof of Directors.
  • Whether the Sponsor or its Directors are registered with the Board.
  • Copies of the financial statement for the previous financial year.
  • Whether, the sponsor has floated any AIF/Venture Capital Funds previously, which are registered with the Board. If yes, details of the same.
  • Details of past experience of Sponsor(s) in advising or managing pools of capital or in fund or Asset or wealth or portfolio management or in the business of buying, selling and dealing of securities or other financial assets

 

DETAILS OF MANAGER:

  • Name and registered address, correspondence address, principal place of Business, mobile number, email id, fax number of the Manager(s).
  • Name, email id, mobile No and email Id of the contact person.
  • The legal status of the manager and date and place of Incorporation of the manager(s), (If Company).
  • Self-attested ID and Address proof of Directors (if Manager is a company).
  • In case Manager being a company Shareholding pattern of directors.
  • Copies of the financial statement for the previous financial year.
  • Brief profile of key Investment Team including experience and professional qualification.
  • Whether, the Manager has managed/ advised any AIF/ Venture Capital Funds previously, which are registered with the Board. If yes, details of the same.
  • Write up on the activities of the manager including past experience in advising or managing pools of capital or in fund or Asset or wealth or portfolio management or in the business of buying, selling, and dealing of securities or other financial assets.

 

DETAILS OF BUSINESS PLAN AND INVESTMENT STRATEGY:

1. Investment objective and Investment style/ strategy of fund.

2. The target Investors

3. The target industries/ Sectors, if any

4. Proposed Corpus

5. Proposed Fee to the Sponsor and Manager

6. Tenure of the Fund or scheme

Details of Regulatory action taken in the past, if any

FAQ’S:

1. What is a 'debt fund'?

A debt fund is an Alternative Investment Fund (AIF) that invests primarily in debt or debt securities of listed or unlisted investee companies according to the stated objectives of the Fund.

2. What is Fund of Funds?

 Fund of Funds, in general parlance as gathered from publicly available sources s an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds, or other securities. In the context of AIFs, a Fund of Fund is an AIF that invests in another AIF.

 

3. In which legal forms can an AIF be set up?

An AIF under the SEBI (Alternative Investment Funds) Regulations, 2012 can be established or incorporated in the form of a trust or a company or a limited liability partnership or a body corporate. Most of the AIFs registered with SEBI are in trust form

 

4. What is the corpus of the AIF?

 “Corpus’’ is the total amount of funds committed by investors to the AIF by way of a written contract or any such document on a particular date.

 

5.What is the limit specified under AIF regulations for number of investors?

No scheme of an AIF (other than angel fund) shall have more than 1000 investors. (Please note that the provisions of the Companies Act, 1956 shall apply to the AIF if it is formed as a company). In case of an angel fund, no scheme shall have more than forty-nine angel investors.

 

6. Who is the Sponsor of the AIF?

‘’Sponsor’’ is any person(s) who set up the AIF and includes promoter in case of a company and designated partner in case of a limited liability partnership.

 

7. Can AIF launch schemes?

Yes. An AIF may launch schemes subject to the filing of a placement memorandum with SEBI. Further, it may be noted that prior to the launch of the scheme, an AIF is required to pay Rs. 1 lakh as scheme fees to SEBI while filing the placement memorandum. Such a fee shall be paid at least 30 days prior to the launch of the scheme. However, payment of scheme fees shall not apply in case of launch of first scheme by the AIF.

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